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Price, Place, People and Local Experience

Author

Listed:
  • Peter Chinloy

    () (American University)

  • William Hardin III

    () (Florida International University)

  • Zhonghua Wu

    () (Florida International University)

Abstract

With property characteristics unobserved or difficult to measure, there are returns to evaluation, due diligence and performance. Buyers can invest in observable human capital signals including location and experience that lower search costs. Buyers with local experience have lower search costs, a higher probability of closing and can earn a purchase discount from the acquisition of human capital developed from repeatedly transacting in a specific real estate market. For 1,793 apartment transactions in Atlanta over the 1995 to 2007 period, a very small focused group of local, experienced buyers receives acquisition discounts. The comparison is with non-locals and locals with two or fewer purchases. Inexperienced locals receive no or little discount and match non-local results. Non-locals do not pay a premium when compared to the typical buyer.

Suggested Citation

  • Peter Chinloy & William Hardin III & Zhonghua Wu, 2013. "Price, Place, People and Local Experience," Journal of Real Estate Research, American Real Estate Society, vol. 35(4), pages 477-506.
  • Handle: RePEc:jre:issued:v:35:n:4:2013:p:477-506
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    More about this item

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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