February 16, 2016
Abstract: When house sellers reach the end of a listing contract without a sale they are faced with several decisions. A seller who wants to continue to market the property can leave it on the market, relist the property immediately, or take it off the market for a period of time before relisting it. Research has shown that properties with longer time-on-market may carry a stigma and sell for less.
In an attempt to mitigate the negative perception of a house that other buyers appear to have passed by, a seller can have the agent relist the property so it appears as a new listing. If a seller decides to relist the property, the owner also has to decide how long to wait before relisting. The authors use a hedonic approach to investigate the choices sellers have when deciding whether to relist their property and the impact those decisions have on the property's selling price. The authors find that relisting a property results in a higher selling price and that to maximize price, the seller should relist the property with the same agent within 30 days.
For more or to review the entire article, visit http://link.springer.com/journal/11146/52/2. Published originally in the Journal of Real Estate Finance and Economics, Vol. 52, No. 2, 2016
What is the Hedonic Model?
In general, the price of a house is related to the characteristics of the house and property itself, the characteristics of the neighborhood and community, and environmental characteristics. Thus, if non-environmental factors are controlled for, then any remaining differences in price can be attributed to differences in environmental quality. For example, if all characteristics of houses and neighborhoods throughout an area were the same, except for the level of air pollution, then houses with better air quality would cost more. This higher price reflects the value of cleaner air to people who purchase houses in the area.
To apply the hedonic pricing method, the following information must be collected:
- A measure or index of the environmental amenity of interest.
- Cross-section and/or time-series data on property values and property and household characteristics for a well-defined market area that includes homes with different levels of environmental quality, or different distances to an environmental amenity, such as open space or the coastline.
The data are analyzed using regression analysis , which relates the price of the property to its characteristics and the environmental characteristic(s) of interest. Thus, the effects of different characteristics on price can be estimated. The regression results indicate how much property values will change for a small change in each characteristic, holding all other characteristics constant.
Learn more about how this model of analysis can be used in real estate online by clicking here.