Distressed Property Sales: Differences and Similarities Across Types of Distress

Marcus T. Allen (), Justin D. Benefield (), Christopher L. Cain () and Norman Maynard ()
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Marcus T. Allen: Florida Gulf Coast University
Justin D. Benefield: Auburn University
Christopher L. Cain: University of Oklahoma
Norman Maynard: College of Charleston

The Journal of Real Estate Finance and Economics, 2024, vol. 68, issue 2, No 6, 318-353

Abstract: Abstract This study analyzes the price and time-on-market effects of short sale and lender-owned properties in the single-family housing market during the recent housing crisis. Short sales increased dramatically during the downturn as an alternative to foreclosures and deed-in-lieu of foreclosure transactions for resolution of defaulted mortgage loans. Using multiple listing service data, this study provides evidence that the price discounts associated with short sales and lender-owned properties differed significantly early in the crisis, but by the end of our sample the discounts were relatively similar in the sample market, which was not as hard-hit by the housing market downturn as markets examined in prior research. Using new time-on-market estimation methodology, the time-on-market results indicate that both short sale properties and foreclosed properties stayed on the market significantly longer than non-distressed properties, which differs from prior findings that foreclosed properties sell faster than non-distressed properties. The study also provides some evidence that different seller types (i.e. short sale-seller versus lender-seller) exhibit differences in their abilities to time their market entry.

Keywords: Short sales; Lender-owned property; REO; Housing crisis; Transaction effects; Probit modeling; Hedonic modeling; Hazard modeling; 2SPS; 2SRI (search for similar items in EconPapers)
JEL-codes: G29 G30 K11 K21 M52 R21 R23 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11146-022-09911-2

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