DOI: 10.1111/iere.12679 ISSN: 0020-6598
HOUSING MARKET DISCOUNT RATES: EVIDENCE FROM BARGAINING AND BIDDING WARS
Hans R.A. Koster, Jan Rouwendal- Economics and Econometrics
Abstract
When selling a home, through the choice of the list price, sellers make a trade‐off between achieving a quick sale at a low price or waiting for higher bids. This list‐price setting decision is governed by a discount rate. Using data on housing sales in the Netherlands, we derive gross discount rates under bilateral bargaining and bidding wars. The estimated discount rates are 25‐35 percent, which is considerably higher than long‐run housing market discount rates and may result from the seller's unfamiliarity with the selling process. The rates are higher for sellers that already moved and have a low education.
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