Auction versus Negotiated Sale: Evidence from Real Estate Sales |
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| Authors: | Yuen Leng Chow Isa E Hafalir Abdullah Yavas |
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| Affiliation: | 1. Department of Real Estate, National University of Singapore, Singapore;2. Tepper School of Business, Carnegie Mellon University, Pittsburgh, PA;3. School of Business, University of Wisconsin, Madison, WI |
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| Abstract: | We offer a theoretical and empirical comparison of auctions and negotiated sales. We first build a simple model to show that auctions generate a higher relative price than negotiated sales when demand for the asset is strong, when the asset is more homogeneous and when the asset attracts buyers with higher valuations. Using data from property sales in Singapore, we find support for our theoretical predictions. In addition, we find that auctions do not necessarily generate a higher price premium for foreclosed properties than for nonforeclosed properties. |
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