Are real estate appraisals based on fundamentals that determine the value of the real estate or on offer price? Does this question really matter? In a game of moral hazard…
Are real estate appraisals based on fundamentals that determine the value of the real estate or on offer price? Does this question really matter? In a game of moral hazard with hidden information, we examine an appraiser’s incentives in conducting an appraisal. We find that a moral hazard problem can arise if the mortgagee rewards the appraiser with future business for successful appraisals. An appraiser may be willing to overstate the value of a property if the lender wants him to do so. Additionally, we define the conditions under which the moral hazard problem actually makes all of the players better or no worse off. We argue that the subjective judgment of an appraiser may be Pareto improving. Thus, excessive regulation of the appraisal industry or finer tuned quantitative models that constrain subjective judgment may actually reduce the gains of real estate trade.
Existing home sellers may be aware of defects in the home that are not observable to the untrained eye of a buyer. Sellers may not disclose the defects in order to receive…
Existing home sellers may be aware of defects in the home that are not observable to the untrained eye of a buyer. Sellers may not disclose the defects in order to receive a higher price. Home warranties for existing homes appear to provide protection against defects. However, it is not clear how home warranty compares against building inspections and seller disclosure laws. In an adverse selection model, we study the tools available to buyers to overcome this problem.
This paper attempts to fill two gaps in the homeownership literature identified by Dietz and Haurin: homeownership in less developed countries and the effects of race…
This paper attempts to fill two gaps in the homeownership literature identified by Dietz and Haurin: homeownership in less developed countries and the effects of race, ethnicity and income on tenure choice.
United Nations data from 1993 and 1998 are used to offer a cross‐country analysis of the determinants of homeownership rates. Consistent with the previous literature, this study confirms that the price‐to‐rent ratio is an important factor in tenure choice and increases in income are associated with increases in the percentage of consumers who choose to own. However, these relationships seem to hold generally only for higher income developed countries.
In contrast to the previous literature that finds race and ethnicity account for a significant portion of the differences in US homeownership rates, this study finds no evidence that these determinants account for differences across countries. The authors investigate the rule of law and find it is closely correlated with income measures which may indicate that countries with stronger laws encourage higher homeownership rates. Finally, capitalist/(formerly) communist regime differences do not appear to explain cross country differences in homeownership rates.
This research is limited by the scope and quality of the UN data.
The paper offers insights from the international evidence for the potential of selected policies to increase domestic homeownership rates and identifies several avenues for future international homeownership research.
This paper provides an initial empirical analysis on international homeownership in an attempt to fill gaps in the homeownership literature.
A game‐theoretic model of moral hazard associated with unobservable builder effort is postulated to examine the effectiveness of homeowner warranties and building code enforcement by local government in assuring desired builders’ effort. Builders have an incentive to claim and charge for high unobservable effort level in constructing homes, but actually exert low effort to earn higher profits. We find that a homeowner warranty increases the unobservable effort of the builder, but cost minimizing behavior by the builder results in an effort choice less than the most efficient level. On the other hand, building code enforcement essentially converts unobservable builder effort to observable effort and efficient effort is indeed possible if enforcement cost is justifiable. However, an overly strict building code may be detrimental to buyers. The conditions under which a buyer would prefer one alternative over the other and where both measures can co‐exist are also examined. The model provides several interesting implications and testable hypotheses. A survey of builders and building codes provides preliminary evidence to support the proposed model.
The need for effective directories of networked information resources becomes more critical as these resources—online library catalogs, file archives, online journal…
The need for effective directories of networked information resources becomes more critical as these resources—online library catalogs, file archives, online journal article repositories, and information servers—proliferate, and as demand grows for intelligent tools to navigate and use such information resources. The existing approaches are based primarily on print‐oriented directories, but print‐oriented directories will not scale to support the future services that will help network users navigate tens of thousands of resources. The paper first explores the “user” perspective in various usage scenarios for employing a database of descriptive information to navigate or access networked information resources. It then considers specific data elements that will be required in a description of these networked information resources. Classification of networked information resources will ultimately rely on large‐scale prototypes, coupled with a new generation of advanced information‐seeking tools, and within the reality of economics.