When you buy a house you typically do not directly own it. What is the effect of this on transaction prices?

Gepubliceerd op 8 januari 2023 om 19:08

Scientific paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4066448


Abstract - Unlike many other major asset classes, when buying a physical asset like real estate, the legal date of the transfer of ownership is typically somewhere after the date of purchase. Using residential real estate as an example, we hypothesize that this period, the time-to-close, has a positive impact on transactions prices as a seller wants to be compensated by the buyer for the expected losses in terms of foregone house price appreciation, interest payments of a bridge loan, and any short-term rental costs over the time-to-close period. We show corroborative empirical evidence using a combination of administrative and realtor data from the Netherlands. Our results imply that the time-to-close is a fundamental part of the transaction process of physical assets and, as such, plays an important role in the price determination of such assets.