IDEAS home Printed from https://ideas.repec.org/p/arz/wpaper/eres2012_108.html
   My bibliography  Save this paper

Human behaviour - an underappreciated factor in real estate transaction analyses

Author

Listed:
  • Michael Dinkel

Abstract

Most valuation approaches examine the ups and downturns of real estate prices mainly focussing on the variables lot size, living space, dwelling age and furniture. These approaches disregard the importance of the individual behaviour of private sellers and buyers. As their decisions are often influenced by uncertainty due to poor market transparency it can be assumed that these decisions are - to some extent - not congruent with rational behaviour. Hence, regression analyses should take both factors - objective and behavioural variables - into account. The empirical study (N=413) in this research analyses the behaviour of brokers and sellers who offer their dwellings through the leading brokerage website in Germany, ImmobilienScout24. They are surveyed directly after the initial listing of the dwelling and then again 5 months later. Human behaviour should be explained by real estate related knowledge, expectations, personal situation and heuristic processes. Heuristic processes reduce the complexity and lead to results which do not coincide with rational behaviour. The heuristic process ´adjustment and anchoring´ is especially important for real estate transactions. Generally, a seller starts from an initial value, e.g listing prices of comparable houses at brokerage websites, and adjusts that value to yield her own dwellings´ value. However, this approach is often led by false individual assumptions. First empirical results show that 25% of private sellers significantly overestimate the appropriate listing price. Three-quarter of private sellers admit, that they have only rudimentary knowledge of the property market and one quarter is forced to sell the property urgently. These results indicate that selling and listing prices of residential properties are also influenced by human behaviour.

Suggested Citation

  • Michael Dinkel, 2012. "Human behaviour - an underappreciated factor in real estate transaction analyses," ERES eres2012_108, European Real Estate Society (ERES).
  • Handle: RePEc:arz:wpaper:eres2012_108
    as

    Download full text from publisher

    File URL: https://eres.architexturez.net/doc/oai-eres-id-eres2012-108
    Download Restriction: no

    File URL: https://eres.architexturez.net/system/files/pdf/eres2012_108.content.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Steven D. Levitt & Chad Syverson, 2008. "Market Distortions When Agents Are Better Informed: The Value of Information in Real Estate Transactions," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 599-611, November.
    2. Goodman, John Jr. & Ittner, John B., 1992. "The accuracy of home owners' estimates of house value," Journal of Housing Economics, Elsevier, vol. 2(4), pages 339-357, December.
    3. Eldar Shafir & Peter Diamond & Amos Tversky, 1997. "Money Illusion," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 341-374.
    4. Justin Benefield & Christopher Cain & Ken Johnson, 2011. "On the Relationship Between Property Price, Time-on-Market, and Photo Depictions in a Multiple Listing Service," The Journal of Real Estate Finance and Economics, Springer, vol. 43(3), pages 401-422, October.
    5. Ford, James Scott & Rutherford, Ronald C. & Yavas, Abdullah, 2005. "The effects of the internet on marketing residential real estate," Journal of Housing Economics, Elsevier, vol. 14(2), pages 92-108, June.
    6. repec:arz:wpaper:eres2011-344 is not listed on IDEAS
    7. Ihlanfeldt, Keith R. & Martinez-Vazquez, Jorge, 1986. "Alternative value estimates of owner-occupied housing: Evidence on sample selection bias and systematic errors," Journal of Urban Economics, Elsevier, vol. 20(3), pages 356-369, November.
    8. Ihlanfeldt, Keith & Mayock, Tom, 2009. "Price discrimination in the housing market," Journal of Urban Economics, Elsevier, vol. 66(2), pages 125-140, September.
    9. Bazerman, Max H. & Neale, Margaret A. & Valley, Kathleen L. & Zajac, Edward J. & Kim, Yong Min, 1992. "The effect of agents and mediators on negotiation outcomes," Organizational Behavior and Human Decision Processes, Elsevier, vol. 53(1), pages 55-73, October.
    10. Beck, Jason & Scott, Frank & Yelowitz, Aaron, 2010. "Competition and market structure in local real estate markets," MPRA Paper 27531, University Library of Munich, Germany.
    11. Valley, Kathleen L. & White, Sally Blount & Neale, Margaret A. & Bazerman, Max H., 1992. "Agents as information brokers: The effects of information disclosure on negotiated outcomes," Organizational Behavior and Human Decision Processes, Elsevier, vol. 51(2), pages 220-236, March.
    12. John P. Harding & Stuart S. Rosenthal & C. F. Sirmans, 2003. "Estimating Bargaining Power in the Market for Existing Homes," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 178-188, February.
    13. Abdullah Yavaş, 1992. "A Simple Search and Bargaining Model of Real Estate Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 20(4), pages 533-548, December.
    14. Abdullah Yavas, 2007. "Introduction: Real Estate Brokerage," The Journal of Real Estate Finance and Economics, Springer, vol. 35(1), pages 1-5, July.
    15. Michel Glower & Donald R. Haurin & Patric H. Hendershott, 1998. "Selling Time and Selling Price: The Influence of Seller Motivation," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 26(4), pages 719-740, December.
    16. Valerie Kupke & Peter Rossini & Sharon Yam, 2011. "An exploration of female home ownership patterns in Australia," ERES eres2011_344, European Real Estate Society (ERES).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Steven Stelk & Leonard V. Zumpano, 2017. "Can Real Estate Brokers Affect Home Prices Under Extreme Market Conditions?," International Real Estate Review, Global Social Science Institute, vol. 20(1), pages 51-73.
    2. Mayock, Tom & Malacrida, Rachel Spritzer, 2018. "Socioeconomic and racial disparities in the financial returns to homeownership," Regional Science and Urban Economics, Elsevier, vol. 70(C), pages 80-96.
    3. Han, Lu & Strange, William C., 2015. "The Microstructure of Housing Markets," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 813-886, Elsevier.
    4. Steegmans, Joep & Hassink, Wolter, 2017. "Financial position and house price determination: An empirical study of income and wealth effects," Journal of Housing Economics, Elsevier, vol. 36(C), pages 8-24.
    5. Andersson, Fredrik & Mayock, Tom, 2014. "How does home equity affect mobility?," Journal of Urban Economics, Elsevier, vol. 84(C), pages 23-39.
    6. Marcus T. Allen & William H. Dare & Lingxiao Li, 2018. "MLS Information Sharing Intensity and Housing Market Outcomes," The Journal of Real Estate Finance and Economics, Springer, vol. 57(2), pages 297-313, August.
    7. Xun Bian & Justin C. Contat & Bennie D. Waller & Scott A. Wentland, 2023. "Why Disclose Less Information? Toward Resolving a Disclosure Puzzle in the Housing Market," The Journal of Real Estate Finance and Economics, Springer, vol. 66(2), pages 443-486, February.
    8. Andres Jauregui & Diane Hite, 2010. "The impact of real estate agents on house prices near environmental disamenities," Housing Policy Debate, Taylor & Francis Journals, vol. 20(2), pages 295-316, March.
    9. Paul M. Anglin & Yanmin Gao, 2023. "Value of Communication and Social Media: An Equilibrium Theory of Messaging," The Journal of Real Estate Finance and Economics, Springer, vol. 66(4), pages 861-903, May.
    10. Geoffrey K. Turnbull & Arno J. van der Vlist, 2022. "Bargaining power and segmented markets: Evidence from rental and owner‐occupied housing," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(5), pages 1307-1333, September.
    11. Terrence Clauretie & Paul Thistle, 2007. "The Effect of Time-on-Market and Location on Search Costs and Anchoring: The Case of Single-Family Properties," The Journal of Real Estate Finance and Economics, Springer, vol. 35(2), pages 181-196, August.
    12. Stijn Dreesen & Sven Damen, 2023. "The accuracy of homeowners’ valuations in the twenty-first century," Empirical Economics, Springer, vol. 65(1), pages 513-566, July.
    13. Genesove, David & Han, Lu, 2012. "Search and matching in the housing market," Journal of Urban Economics, Elsevier, vol. 72(1), pages 31-45.
    14. Stephen A. Samaha & Wagner A. Kamakura, 2008. "Assessing the Market Value of Real Estate Property with a Geographically Weighted Stochastic Frontier Model," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 36(4), pages 717-751, December.
    15. Nasser Daneshvary & Terrence Clauretie, 2013. "Agent Change and Seller Bargaining Power: A Case of Principal Agent Problem in the Housing Market," The Journal of Real Estate Finance and Economics, Springer, vol. 47(3), pages 416-433, October.
    16. Paul E. Carrillo, 2005. "Assessing the Value of On-line Information Using a Two-sided Equilibrium Search Model in the Real Estate Market," Computing in Economics and Finance 2005 307, Society for Computational Economics.
    17. M.I. Droes & W.H.J. Hassink, 2009. "Sale Price Expectations and Mortgage Commitment: Inaccuracy versus Price Setting Behaviour," Working Papers 09-24, Utrecht School of Economics.
    18. Geoffrey Turnbull & Jonathan Dombrow, 2007. "Individual Agents, Firms, and the Real Estate Brokerage Process," The Journal of Real Estate Finance and Economics, Springer, vol. 35(1), pages 57-76, July.
    19. Elliot Anenberg, 2016. "Information Frictions And Housing Market Dynamics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57(4), pages 1449-1479, November.
    20. Thomas Y. Mathä & Alessandro Porpiglia & Michael Ziegelmeyer, 2014. "Wealth differences across borders and the effect of real estate price dynamics: Evidence from two household surveys," BCL working papers 90, Central Bank of Luxembourg.

    More about this item

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arz:wpaper:eres2012_108. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Architexturez Imprints (email available below). General contact details of provider: https://edirc.repec.org/data/eressea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.