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Foreclosure discounts for German housing markets

Tobias Just (International Real Estate Business School, Universität Regensburg, Regensburg, Germany)
Michael Heinrich (International Real Estate Business School, Universität Regensburg, Regensburg, Germany)
Mark Andreas Maurin (VIVUM, Hamburg, Germany)
Thomas Schreck (Ostbayerische Technische Hochschule Regensburg, Regensburg, Germany)

International Journal of Housing Markets and Analysis

ISSN: 1753-8270

Article publication date: 8 August 2019

Issue publication date: 26 March 2020



This paper aims to investigate the foreclosure discount for the German residential market in the years from 2008 to 2011.


The determinants of the foreclosure discount are estimated in a hedonic price model. The analysis is based on a unique data set compiled from three different data sources with 135,000 foreclosed properties.


The findings reveal that residential units in foreclosures are sold at a discount of 19 per cent compared to residential units with similar characteristics that are not in foreclosure. Second, a regional pattern can be observed, with discounts being negatively correlated to unemployment risk and liquidity. Third, the model with interaction terms shows that foreclosure discounts are linked to specific property characteristics. Fourth, these object-related risks are typically smaller than regional risks or locational risks.

Research limitations/implications

Given the highly fragmented system of Gutachterausschüsse in Germany, who are responsible for collecting transaction data, we were not able to directly analyze transaction data, but only a proxy for this price information.

Practical implications

The results can be important for financial institutions that are trying to assess the risk of lending for a specific object in a specific location. So far, banks primarily try to assess the default risk of private lenders by analyzing the debtor’s financial position and the quality of the property. The analysis provides insights into which characteristics of a property might imply additional risk, and in which region these risks are biggest.


To the best of the authors’ knowledge, this is the first attempt to analyze the foreclosure discount for the German housing market.



Just, T., Heinrich, M., Maurin, M.A. and Schreck, T. (2019), "Foreclosure discounts for German housing markets", International Journal of Housing Markets and Analysis, Vol. 13 No. 2, pp. 143-163.



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