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Price Signals and Uncertainty in Commercial Real Estate Transactions

35 Pages Posted: 6 Jul 2017 Last revised: 7 Jul 2017

Matthew L. Cypher

Georgetown University - Robert Emmett McDonough School of Business

S. McKay Price

Lehigh University - Perella Department of Finance

Spenser J. Robinson

Central Michigan University - College of Business Administration

Michael Seiler

College of William and Mary

Date Written: July 3, 2017

Abstract

Using a sample of CCIM designees and candidates in an experimental setting, this study examines the impact of broker signaling in commercial real estate transactions. It also explores the effect of certainty of closure in commercial real estate transactions. Findings suggest brokers are able to influence transaction pricing. Moreover, detailed analysis reveals that when a signal is above a reference point implied by previous transactions, the strength of the signal matters; privately communicated signals from reliable sources have significantly greater impact than signals which are made widely available. Additionally, we find an approximately 10% premium in transactions with lower certainty of closure than one with high certainty. The latter result varies by transactional participant type; owner/developers require a larger premium than institutional sellers.

Keywords: Commercial Real Estate, Broker, Signaling, Uncertainty, Execution Risk

JEL Classification: G11, G24, R33

Suggested Citation

Cypher, Matthew L. and Price, S. McKay and Robinson, Spenser J. and Seiler, Michael, Price Signals and Uncertainty in Commercial Real Estate Transactions (July 3, 2017). Journal of Real Estate Finance and Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2996742

Matthew L. Cypher

Georgetown University - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

S. McKay Price

Lehigh University - Perella Department of Finance ( email )

621 Taylor Street
Bethlehem, PA 18015
United States
610-758-4787 (Phone)

HOME PAGE: http://www.mckayprice.com

Spenser J. Robinson

Central Michigan University - College of Business Administration ( email )

Mt. Pleasant, MI 48858
United States

Michael Seiler (Contact Author)

College of William and Mary ( email )

P.O. Box 8795
Williamsburg, VA 23185
United States

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