Prices in Different Modes of Sale: Theory and RCT Evidence from Forced Sales

Matz Dahlberg, Mikael Lundholm, Mattias Nordin and Henk Schouten

No e74gp_v1, SocArXiv from Center for Open Science

Abstract: The mode of sale may affect prices not only through selling rules, but also by changing the composition of potential buyers. We study this mechanism by randomly varying the mode of sale in a three-year field experiment, conducted with the Swedish Enforcement Authority, that assigns foreclosed homes to auction or brokered sale. Assignment to brokered sales raise prices by about 15% relative to auctions. Using pre-treatment appraisals, we show that the foreclosure discount is mode-dependent: auction sales occur at a substantial discount, whereas brokered sales occur close to appraised market value. To explain why the discount arises in auctions, we develop a model in which auction participation barriers deter household buyers and create scope for resale-oriented professional buyers, lowering prices and potentially generating inefficient allocations. Historical individual-level foreclosure data support the mechanism: repeat buyers are present in auctions, purchase at larger discounts, and resell more quickly than other buyers.

Date: 2026-06-18
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:e74gp_v1

DOI: 10.31219/osf.io/e74gp_v1

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