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Auction Price Formation with Costly Occupants: Evidence Using Data from the Osaka District Court

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  • Takako Idee

    (Faculty of Economics, Seikei University)

  • Shinichiro Iwata

    (Faculty of Economics, University of Toyama)

  • Teruyuki Taguchi

    (National Federation of Credit Guarantee Corporations)

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    Abstract

    Foreclosure properties sold at Japanese judicial auctions are delivered to buyers with an unclear title when occupants exist, because the foreclosure laws protect occupants from compulsory execution of auctions. The existence of occupants theoretically affects the auction price through two channels. First, it affects the reserve price, and this changes in auction price. Second, the number of bidders changes in response to changes in the reserve price that is controlled by occupants, and this changes the auction price. Using data from the Osaka District Court, we empirically find that the existence of occupants in properties reduces the auction price through two channels.

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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2008/2008cf593.pdf
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    Bibliographic Info

    Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-593.

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    Length: 22pages
    Date of creation: Sep 2008
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    Handle: RePEc:tky:fseres:2008cf593

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    1. Toda, Yasushi & Nozdrina, Nadezhda & Maddala, G S, 1998. " The Auction Price of Apartments in Moscow: Hedonic Estimation in Disequilibrium," Economic Change and Restructuring, Springer, vol. 31(1), pages 1-14.
    2. Joseph T.L. Ooi & C.F. Sirmans & Geoffrey K. Turnbull, 2006. "Price Formation Under Small Numbers Competition: Evidence from Land Auctions in Singapore," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 34(1), pages 51-76, 03.
    3. Christopher J. Mayer, 1998. "Assessing the Performance of Real Estate Auctions," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 26(1), pages 41-66.
    4. Quan, Daniel C, 1994. "Real Estate Auctions: A Survey of Theory and Practice," The Journal of Real Estate Finance and Economics, Springer, vol. 9(1), pages 23-49, July.
    5. McAfee, R Preston & Quan, Daniel C & Vincent, Daniel R, 2002. "How to Set Minimum Acceptable Bids, with an Application to Real Estate Auctions," Journal of Industrial Economics, Wiley Blackwell, vol. 50(4), pages 391-416, December.
    6. Mayer Christopher J., 1995. "A Model of Negotiated Sales Applied to Real Estate Auctions," Journal of Urban Economics, Elsevier, vol. 38(1), pages 1-22, July.
    7. Marcus T. Allen & Judith Swisher, 2000. "An Analysis of the Price Formation Process at a HUD Auction," Journal of Real Estate Research, American Real Estate Society, vol. 20(3), pages 279-298.
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