Abstract

http://ssrn.com/abstract=1108668
 
 

References (19)



 


 



The Markets for Real Estate Presales: A Theoretical Approach


Peng Liu


Cornell University

Robert H. Edelstein


University of California, Berkeley - Fisher Center for Real Estate and Urban Economics

Fang Wu


Citadel LLC

November 30, 2008

Journal of Real Estate Finance and Economics, Forthcoming

Abstract:     
Presale agreements have become a pervasive worldwide practice for residential sales, especially in many Asian markets. Although there is a burgeoning empirical literature on presales agreements, only a few papers actually address their theoretical foundations. We create a set of interrelated theoretical models for explaining how and why developers and buyers engage in presale contracts for non-completed residential dwellings. Given heterogeneous consumer beliefs about future market prices, developers and buyers enter into presale agreements to mitigate, two intertwined, fundamental risks: those of real estate market valuation and default. Our analyses are consistent with prior empirical findings and provide additional theoretical insights for understanding the market for presales.

Number of Pages in PDF File: 29

Keywords: Presale, Hedge Real Estate Risks, Housing, Heterogeneous Beliefs

JEL Classification: G12, G14, G21, H31

Accepted Paper Series


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Date posted: March 24, 2008 ; Last revised: September 20, 2011

Suggested Citation

Liu, Peng and Edelstein, Robert H. and Wu, Fang, The Markets for Real Estate Presales: A Theoretical Approach (November 30, 2008). Journal of Real Estate Finance and Economics, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1108668

Contact Information

Peng Liu (Contact Author)
Cornell University ( email )
465B Statler Hall
Ithaca, NY 14853
United States
6072542960 (Phone)
HOME PAGE: http://www.professorliu.net
Robert H. Edelstein
University of California, Berkeley - Fisher Center for Real Estate and Urban Economics ( email )
Haas School of Business
Berkeley, CA 94720-1900
United States
510-643-6105 (Phone)
510-643-7357 (Fax)
Fang Wu
Citadel LLC ( email )
131 S Dearborn Street
Chicago, IL 60603
United States
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