The Psychology Behind Why Underwater Investment Properties are Not Listed for Sale

Advances in Behavioral Finance & Economics, Forthcoming

Posted: 22 Jun 2011

See all articles by Michael Seiler

Michael Seiler

College of William and Mary - Finance

Mark Lane

affiliation not provided to SSRN

Vicky L. Seiler

Johns Hopkins University

Date Written: June 20, 2011

Abstract

This study investigates the reasons why people do not list underwater real estate investment properties for sale. Conventional wisdom is that these investors simply cannot afford to sell (the affordability constraint). However, we demonstrate that economic reasons explain as little as 31.7% of the sample. Behavioral explanations make up the rest. Specifically, familiarity bias, false reference points, and to a lesser extent, status quo deviation aversion are the true drivers of the listing decision. Underlying respondent behavioral traits were not found to systematically explain who would be more likely to follow each behavioral reason not to list. The inability to create a definitive behavioral traits profile is consistent with past studies that were unable to significantly link demographic characteristics to behavior.

Keywords: behavioral real estate, familiarity bias, false reference point, status quo deviation aversion

Suggested Citation

Seiler, Michael and Lane, Mark and Seiler, Vicky L., The Psychology Behind Why Underwater Investment Properties are Not Listed for Sale (June 20, 2011). Advances in Behavioral Finance & Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1868599

Michael Seiler (Contact Author)

College of William and Mary - Finance ( email )

VA
United States

HOME PAGE: http://mason.wm.edu/faculty/directory/seiler_m.php

Mark Lane

affiliation not provided to SSRN ( email )

Vicky L. Seiler

Johns Hopkins University ( email )

Baltimore, MD 20036-1984
United States

Register to save articles to
your library

Register

Paper statistics

Abstract Views
366
PlumX Metrics