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The Relationship between Foreclosure Status and Apartment Price

Empirical studies disclose that foreclosed residential properties sell at a discount from the expected market price for non-foreclosed residences. This investigation shows that prior findings on residential properties can be extended to include income-producing properties. In addition, it employs market rent to control for variation in property quality. An analysis of apartment sales in Phoenix, Arizona, demonstrates that foreclosure-status apartments sell at a 22% discount when compared to non-foreclosure apartment sales. The rationale for accepting discounted process may be atypical seller motivations such as a need to satisfy regulatory capital requirements, to mitigate negative stock price effects, or to protect credit ratings.

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File URL: http://pages.jh.edu/jrer/papers/pdf/past/vol12n01/v12p101.pdf
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Article provided by American Real Estate Society in its journal Journal of Real Estate Research.

Volume (Year): 12 (1996)
Issue (Month): 1 ()
Pages: 101-109

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Handle: RePEc:jre:issued:v:12:n:1:1996:p:101-109
Contact details of provider: Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
Web page: http://www.aresnet.org/
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Order Information: Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
Web: http://pages.jh.edu/jrer/about/get.htm Email:


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  1. Palmquist, Raymond B, 1984. "Estimating the Demand for the Characteristics of Housing," The Review of Economics and Statistics, MIT Press, vol. 66(3), pages 394-404, August.
  2. Kane, Edward J, 1990. " Principal-Agent Problems in S&L Salvage," Journal of Finance, American Finance Association, vol. 45(3), pages 755-64, July.
  3. Charles A. Smith & Mark J. Kroll, 1989. "Utility Theory and Rent Optimization: Utilizing Cluster Analysis to Segment Rental Markets," Journal of Real Estate Research, American Real Estate Society, vol. 4(1), pages 61-71.
  4. Karl L. Guntermann & Stefan Norrbin, 1987. "Explaining the Variability of Apartment Rents," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 15(4), pages 321-340.
  5. Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, vol. 70(3), pages 474-75, June.
  6. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  7. Fred A. Forgey & Ronald C. Rutherford & Michael L. VanBuskirk, 1994. "Effect of Foreclosure Status on Residential Selling Price," Journal of Real Estate Research, American Real Estate Society, vol. 9(3), pages 313-318.
  8. James D. Shilling & John D. Benjamin & C.F. Sirmans, 1990. "Estimating Net Realizable Value for Distressed Real Estate," Journal of Real Estate Research, American Real Estate Society, vol. 5(1), pages 129-140.
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