Affordability and the Value of Seller Financing

29 Pages Posted: 15 Mar 2004 Last revised: 22 Aug 2010

See all articles by Donald R. Haurin

Donald R. Haurin

Ohio State University (OSU) - Economics

Patric H. Hendershott

University of Aberdeen - Centre for Property Research; National Bureau of Economic Research (NBER)

Date Written: September 1985

Abstract

The typical methodology in valuing seller financing consists of calculating a discount -- the present value of the after-tax interest savings due to the creative financing --and including this variable, along with other characteristics of the purchased house, in an hedonic price equation explaining the house price actually paid. Resulting from this equation is a set of marginal prices corresponding to each characteristic of the house, including the quantity (discount) of creative finance accompanying the house. The central question usually addressed is whether the discount is fully capitalized in the value of the house -- whether the price of creative finance is unity. In our view, one should not ask what the price of creative finance is because this price, like that of other housing attributes, likely depends upon supply and demand conditions. We develop and estimate a model incorporating this dependency.

Suggested Citation

Haurin, Donald R. and Hendershott, Patric H., Affordability and the Value of Seller Financing (September 1985). NBER Working Paper No. w1695. Available at SSRN: https://ssrn.com/abstract=338773

Donald R. Haurin (Contact Author)

Ohio State University (OSU) - Economics ( email )

154 N. Oval Mall
1010G Derby Hall
Columbus, OH 43210-1172
United States
614-292-0482 (Phone)
614-292-9530 (Fax)

Patric H. Hendershott

University of Aberdeen - Centre for Property Research ( email )

Aberdeen AB24 2UF
Scotland

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
24
Abstract Views
684
PlumX Metrics