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Offer price, transaction price and time‐on‐market

Kicki Björklund (John Mattson Fastighets AB, Lidingö, Sweden)
John Alex Dadzie (Building and Real Estate Economics, Royal Institute of Technology, Stockholm, Sweden)
Mats Wilhelmsson (Building and Real Estate Economics, Royal Institute of Technology, Stockholm, Sweden)

Property Management

ISSN: 0263-7472

Article publication date: 1 August 2006

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1706

Abstract

Purpose

The purpose of this paper is to investigate whether or not the offer price affects the transaction price and the number of days the property is on the market. Specifically, is it possible for the broker to use the offer price as an instrument for obtaining a higher transaction price?

Design/methodology/approach

To test the hypothesis the general hedonic model is used, where the deviation of the transaction price and expected price from the offer price is a function of time on the market.

Findings

The results indicate that a high offer price is more likely to result in a high ratio of transaction price to expected price compared to a low offer price.

Research limitations/implications

However, the overall conclusion is affected by the state of the market, that is, whether the market is static, rising or falling.

Practical implications

The best selling strategy in a rising market seems to be set a high offer price compared to the expected sale price.

Originality/value

The main contribution is that the paper not only analyzes the relationship between offer and transaction price, but also its relationship to expected price. It also tests for the existence of spatial autocorrelation, which is unique in this type of study.

Keywords

Citation

Björklund, K., Alex Dadzie, J. and Wilhelmsson, M. (2006), "Offer price, transaction price and time‐on‐market", Property Management, Vol. 24 No. 4, pp. 415-426. https://doi.org/10.1108/02637470610671631

Publisher

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Emerald Group Publishing Limited

Copyright © 2006, Emerald Group Publishing Limited