Examining the Cash-Only Price Discount and the Driving Forces of Cash-Only Transactions in the Housing Market

Youngme Seo (), Cynthia Holmes () and Mark (Seung Hwan) Lee ()
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Youngme Seo: Ryerson University
Cynthia Holmes: Ryerson University
Mark (Seung Hwan) Lee: Ted Rogers School of Management, Ryerson University

The Journal of Real Estate Finance and Economics, 2023, vol. 67, issue 3, No 6, 480-516

Abstract: Abstract This paper investigates the effects of cash-only transactions on residential property values before, during and after the financial crisis. Using a comprehensive database of residential property sales in Tallahassee, FL from 2006 to 2015 and a propensity score matching model, we find that, on average, cash-only transaction is associated with a 4.9% discount to the overall housing price. Further analyses reveal that the cash-only discount is present only in the lower- price segment after the financial crisis. Although cash-only transactions are more common for distressed, investor-purchased and rental properties, we find no significant cash-only price discount for these property categories except for the lower-priced segment. Overall, we demonstrate that cash-only price discounts are less contingent on the distressed status, but more so driven by the increased supply and attractiveness of lower-priced homes by investors.

Keywords: Cash-only transaction; Cash discount; Residential real estate; Financial crisis (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11146-020-09807-z

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