Hijacking the auction – seller's or buyer's curse?
Journal of European Real Estate Research
ISSN: 1753-9269
Article publication date: 21 March 2022
Issue publication date: 17 October 2022
Abstract
Purpose
This paper aims to investigate the likelihood and price effects of auction hijacking – transactions conducted before a planned auction – in the residential real estate market.
Design/methodology/approach
Using a sample of 84,203 residential properties in Oslo, Norway for the period 2007–2017, the authors employ a probit sales choice model to study the likelihood of auction hijacking and hedonic models, fixed effects models and propensity score matching to investigate the price effects.
Findings
The authors find that auction hijacking is more likely to occur in periods of higher market activity and that hijacked auction properties sell at a premium of approximately 4% compared with properties sold at regularly conducted auctions. One possible explanation for the premium could be that risk aversion among buyers leads to a higher likelihood of hijacking offers and higher prices due to the risk reduction premium that sellers can extract.
Originality/value
For most households, buying a home is an investment of great economic significance, and understanding the different aspects of the auction is paramount for both buyers and sellers. Policymakers need to be aware of the market effects from auction hijacking and determine whether restrictions should be introduced.
Keywords
Acknowledgements
The authors would like to thank two anonymous referees who have contributed to improving this paper.
Declarations of interest: none. This research did not receive any specific grant from funding agencies in the public, commercial or not-for-profit sectors.
Citation
Flått, M., Olaussen, J.O., Oust, A. and Sønstebø, O.J. (2022), "Hijacking the auction – seller's or buyer's curse?", Journal of European Real Estate Research, Vol. 15 No. 3, pp. 387-404. https://doi.org/10.1108/JERER-07-2021-0039
Publisher
:Emerald Publishing Limited
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