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 17/2: Determinants of a Foreclosure Discount

Herman Donner ()
Additional contact information
Herman Donner: 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: Using a dataset with individual appraisals of foreclosed apartments sold through auction in Stockholm, Sweden, the issue of selection bias and a potential overestimation of a foreclosure related discount on price is addressed. A mean discount of 7.9% with a corresponding median value of 9.5% is shown. A hedonic model is also applied. It is found that about half of the impact on price caused by a forced sale is attributable to the search process on the real estate market. These results contrasts from earlier research having explained a negative impact on price to seller motivational factors. These results provide insight towards the dynamics of a negative impact on price caused by a forced sale, and has the potential to allow stakeholders to model a potential discount in greater detail for individual foreclosed properties, and contribute to management of credit risk.

Keywords: Foreclosure; Hedonic Models

JEL-codes: D80; D82; R30; R31

36 pages, October 12, 2017

Full text files

record.jsf?dswid=556&pid=diva2%3A1148926&c=1&searchType=SIMPLE&language=sv&query=herman+donner&af=%5B%5D&aq=%5B%5B%5D%5D&aq2=%5B%5B%5D%5D&aqe=%5B%5D&noOfRows=50&sortOrder=author_sort_asc&sortOrder2=title_sort_asc&onlyFullText=false&sf=all  

Download statistics

Questions (including download problems) about the papers in this series should be directed to Herman Donner ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-01-23 23:34:59.