Working Papers

Foreclosure Externalities and Real Estate Liquidity.  Xun Bian, Raymond T. Brastow, Bennie D. Waller and Scott A. Wentland.  R&R at Real Estate Economics.

We examine the external impact of foreclosures, showing empirically how foreclosed properties affect the liquidity of nearby homes. We find a foreclosure increases a nearby home’s time on market by approximately 30%, on average, which is primarily driven by a disamenity effect. There is evidence that this delay comes from surprises or information shocks to nearby sellers, as foreclosures that come on and/or leave the market after a nearby home’s listing date show the largest adverse liquidity effects. However, when there is no surprise and a nearby foreclosure remains through the entire marketing period, sellers tended to discount list prices more steeply, effectively counteracting these liquidity effects. More generally, the results suggest that information, pricing, and expectations play key roles in how this externality is absorbed by the real estate market.

Licensure, Agency Costs and Performance in the Real Estate Market:  Evidence from Agent-Owned Properties.  Geoffrey K. Turnbull, Bennie D. Waller and Scott A. Wentland. R&R at Management Science

Which more effectively mitigates the principal-agent problem: agent education regarding ethical/fiduciary responsibilities or the structure of their incentives? We study this question for a real estate market where heterogeneity across agent-types and detailed performance microdata provide a unique opportunity to examine how professional education and incentive structures affect the consequences of principal-agent relationships. The empirical results clearly indicate that additional ethics education or improvements in productivity obtained while advancing in licensure status do not attenuate the principal-agent problem. In contrast, the results reveal that differences in compensation structures across particular brokers can largely eliminate agency costs in this market.

Sex and Selling: Real Estate Agent Gender, Bargaining, House Price and Liquidity. Duong Pham, Geoffrey K. Turnbull and Bennie D. Waller. R&R at Journal of Real Estate Finance and Economics.

This paper offers a search model with Nash bargaining to identify various channels through which agent gender affects selling price and selling time in the resale market for houses. The theory is used in conjunction with the empirical model to infer agent bargaining power when dealing with the same or opposite sex agents on the other side of the transaction. The results reveal that the bargaining power of agents depends on their sex and that of the agent on the other side of the transaction, but it also depends on housing market conditions. Female agents assisting buyers have stronger bargaining power when facing female listing agents than when facing male agents in rising or falling markets. The bargaining power of male selling agents assisting buyers is stronger when facing female listing agents than when facing male agents in the rising market, but it is invariant with respect to listing agent sex in the declining market.

Properties that transact at/or above listing price:  Better broker, strategic pricing or just dumb luck? Geoffrey K. Turnbull, Bennie D. Waller and Velma Zahirovic-Herbert.  Under review at Journal of Real Estate Finance and Economics.

A surprisingly large number of houses sell above listing prices in a wide range of markets and in all market conditions. The question is: why do some houses sell above listing price while neighboring similar houses do not? Is it that sellers misprice the property at the outset, work with real estate brokers who are particularly skilled at bringing in high value buyers, or are simply lucky to have high value buyers show up during the marketing period? This paper makes two contributions. It offers an empirical framework to isolate seller and agent influences on the likelihood of selling above listing price. It also offers empirical evidence about the seller, agent and market determinants of sales above list across all market phases. Sellers who do not follow their agent’s guidance and under-price their property increase the likelihood of selling above list. Agent experience also increases the likelihood. We also identify specific marketing strategies and agent incentives that do and do not appear to influence the likelihood of selling above listing price once the other seller behavior, agent characteristics, and market conditions are taken into account.

The Impact of Gas Prices on the Marketing Outcomes of Residential Real Estate. Bennie D. Waller and Geoffrey K. Turnbull

This is the first empirical study to investigate the impact of gasoline prices and commuting distances on the marketing outcomes of residential real estate. The results indicate that while gasoline prices, commuting distances and the interactive effect don’t significantly impact housing values, they do have a negative impact on housing liquidity.  Specifically, over the period studied a $1.00 change in gasoline prices could increase a properties marketing duration by over two weeks.  Given the increase in marketing duration and the lack of impact on selling price suggests a possible agent effort dilemma. These findings are robust across multiple methodologies.

The Impact of Presidential Elections on the Marketing Outcomes of Residential Properties. Geoffrey K. Turnbull, Bennie D. Waller and Justin Contat.

Using a data set from a central Virginia MLS, we show that the uncertainty in the housing market before an election has statistically significant effects on both price and time on market, though the sign and magnitude of the changes depend upon the type of election. For presidential elections without an incumbent running, we find that election uncertainty is associated with a decrease in both price and time on market, both before and after the election. In contrast, for presidential elections with an incumbent and gubernatorial elections, we find that election uncertainty is associated with an increase in price and time on market, both before an after the election. Our results also suggest that these effects are likely to persist even after the election has occurred.

Restrictions versus Amenities:  The Effect of a Home Owners Association on Property Values. Kimberly Goodwin, Claire Reeves LaRoche and Bennie D. Waller.

Common-interest developments (CIDs) or planned urban developments (PUDs), include a multitude of property types such as condos, town homes, coops, and single-family residences.  Many such developments are located in elite areas, which are enclosed or gated communities privately governed by a homeowners’ association (HOA) and managed by an HOA board of directors comprised of community homeowners.  While such communities and their governing bodies have been widely criticized for their onerous rules, regulations and exclusionary practices, many argue that the amenities, benefits and utility afforded to its members provide a large degree of satisfaction for homeowners.  In fact, one of the purposes of an HOA is to preserve and enhance home values by creating an environment with minimal negative externalities.  Although it is generally assumed that an HOA does add value, these associations have also generated a number of controversial disputes.  This paper examines the effects of an HOA on marketability including selling price, marketing duration and probability of a successful transaction. The results show that the impact of the HOA on price, marketing time, and probability of sale are not even across price segments and exist even after controlling for the presence of gated communities. 

Why Disclose Less Information? Toward Resolving a Disclosure Puzzle in the Housing Market. Xun Bian, Justin Contat, Bennie D. Waller Scott A. Wentland.

Property Occupancy: The Anomalies of Owner Agent Properties and the Resulting Impact of Principal/Agent Conflict. Geoffrey K. Turnbull, Bennie D. Waller and Velma Zahirovic-Herbert.