Thursday, June 18, 2009

Significance of Seller Paid Cost in Residential Real Estate

When selling residential property, there are several techniques used by the seller to make the property more attractive to potential buyers. One of those techniques is the seller offering to pay for some of the costs (including closing costs, repairs, etc.). From the sellers' point of view, it is commonly given that a) the final/net funds received from the sale and b) the least amount of time the house stays on the market, are what matter. From the financial aspect, allocating some funds for closing costs, repairs, etc. , which otherwise is expected to be lost in discount needed to arrive at final sales price, is a well known practice. The seller, after paying for some of the costs, expects to recover those costs at the end, or at least expects a positive correlation between the amount of paid costs vs. the final sales price. From the time aspect, it is expected that such practice will also result in the house being sold faster than otherwise. My hypothesis is that there is no significant correlation between the amount of seller paid costs (% of asking price) vs. the final sales price (% discount applied to asking price in arriving at the final sales price) or between the amount of seller paid costs (% of asking price) vs. the number of days a house stays on the market.

1 comment:

Dr. Hansz said...

There should be some interesting thing that you can examine using the 'seller paid' cost information in the MLS. Also, I don't think others have studied this field in depth.