Seller Over-Pricing and Listing Contract Length: The Effects of Endogenous Listing Contracts on Housing Markets

Abstract

This paper examines how seller pricing decisions influence listing contract length and how these decisions affect price and liquidity in housing markets. Because list price affects broker effort required to sell the property, brokers respond to seller overpricing by increasing their desired listing period. At the same time, sellers respond to longer listing contracts by adjusting their pricing strategy. Both affect broker sales effort, hence realized selling price and liquidity. House transaction data from Virginia indicate that greater over-pricing by sellers prompts brokers to pursue longer listing contracts, which subsequently lengthen marketing time but increase selling price. The results reveal a novel transmission mechanism from higher list price (which induces longer contracts) to selling price and liquidity.

Keywords: Listing contract, list price, seller pricing, house price, house liquidity