Auction Versus Negotiated Sale: Evidence from Real Estate Sales

49 Pages Posted: 10 Apr 2011

See all articles by Yuen Leng Chow

Yuen Leng Chow

National University of Singapore - Institute of Real Estate Studies

Isa Emin Hafalir

Carnegie Mellon University - David A. Tepper School of Business

Abdullah Yavas

University of Wisconsin - School of Business - Department of Real Estate and Urban Land Economics

Date Written: February 8, 2011

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 that the auction mechanism obtains a higher relative price in an “up market” than in a flat or down market, in the high-end segment of the property market, and for relatively homogeneous properties than heterogeneous properties.

Keywords: Auction, Negotiated Sale, Market Conditions, Product Homogeneity, Foreclosure

JEL Classification: D44, R31

Suggested Citation

Chow, Yuen Leng and Hafalir, Isa Emin and Yavas, Abdullah, Auction Versus Negotiated Sale: Evidence from Real Estate Sales (February 8, 2011). Available at SSRN: https://ssrn.com/abstract=1806067 or http://dx.doi.org/10.2139/ssrn.1806067

Yuen Leng Chow

National University of Singapore - Institute of Real Estate Studies ( email )

21 Heng Mui Keng Terrace #04-02
119613
Singapore
+65-66015040 (Phone)

Isa Emin Hafalir (Contact Author)

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

Abdullah Yavas

University of Wisconsin - School of Business - Department of Real Estate and Urban Land Economics ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States

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