Capitalization of Seller-Paid Concessions Near the Recent Peak of the Housing Bubble
Article
Beracha, E. (2009). Capitalization of Seller-Paid Concessions Near the Recent Peak of the Housing Bubble
. 18(2), 143-150. 10.1080/10835547.2009.12092010
Beracha, E. (2009). Capitalization of Seller-Paid Concessions Near the Recent Peak of the Housing Bubble
. 18(2), 143-150. 10.1080/10835547.2009.12092010
Using listing price as a proxy to the market value of residential housing, this study examines the extent to which seller-paid concessions are capitalized into the final selling price of residential real estate. The central hypothesis of this work is that amounts paid by the seller toward closing cost, discount points or down payment are capitalized into the selling price. First-time home buyers, however, particularly during a period when home financing is plentiful, are willing to pay a liquidity premium on concessions paid by the seller. The empirical results are consistent with the hypothesis of the paper.
