Scandinavian Working Papers in Economics

Working Paper Series,
Royal Institute of Technology, Department of Real Estate and Construction Management & Centre for Banking and Finance (cefin)

No 13/12: Flippers and the market for lemons: An explorative study of renovations in cooperative housing

Rickard Engström and Hans Lind ()
Additional contact information
Rickard Engström: Department of Real Estate and Construction Management, Royal Institute of Technology, Postal: Department of Real Estate and Construction Management , Royal Institute of Technology, Brinellvägen 1, 100 44 Stockholm, Sweden
Hans Lind: Department of Real Estate and Construction Management, Royal Institute of Technology, Postal: Department of Real Estate and Construction Management , Royal Institute of Technology, Brinellvägen 1, 100 44 Stockholm, Sweden

Abstract: A large part of the Swedish housing stock was built between 1955 and 1975 and there is currently a large need for renovations. In this article the focus is on apartment renovations in cooperative housing where the individual owner of the apartment is responsible for renovations. Lack of competence and asymmetric information should create a role for a professional "flipper", a person that buys an non renovated apartment, renovates it and then sells the renovated apartment. Interviews were carried out with a number of "flippers" - called "speckies" in Sweden - to understand how they work and how this market functions. As the buyer of the renovated apartment will have problems identifying good renovations from bad renovations (good speckies from bad speckies) it seems that bad speckies drive out good speckies, just as in Akerlof´s lemons model. All speckies in Sweden have problems with getting permits for buying and when trying to borrow money in the banks. From an efficiency point of view there should have be a role for the Good Speckies, as they should be able to carry out the renovation in a more professional way, compared both to the seller doing the renovation or the byer doing the renovation. Possible measures are also discussed, e.g. authorization systems and mandatory inspections before apartment sales. Keywords:

Keywords: apartment renovation; cooperative housing; flippers; market for lemons; Sweden

JEL-codes: R00; R21; R31

15 pages, August 23, 2013

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WP201312.pdf PDF-file 

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