Preview

List Price Information in the Negotiation of Commercial Real Estate Transactions: Is Silence Golden?

Good Essays
Open Document
Open Document
1017 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
List Price Information in the Negotiation of Commercial Real Estate Transactions: Is Silence Golden?
Abdulwahed Firas Group number 135

Title of the article
List Price Information in the Negotiation of Commercial Real Estate Transactions: Is Silence Golden.

Author / authors of the article
< DEAN. Gatzlaff >; < PENG, Liu > …
Publishing year
2013
Review / Journal
The Journal of Real Estate Finance and Economics

Volume, Number
< 47 >
Pages

ISSN / ISBN
< 1573-045X >
Abstract
We examine the use (and non-use) of list price information in the process of marketing commercial real estate. While housing market research suggests that list prices can serve as a strong anchor and/or signal, list price information is included in less than one-third of the commercial property sales and is less likely to be included as part of the sellers’ offering information for larger and more complex properties. Given the potentially powerful effect of list prices (first offers) on outcomes, the non-use of list price information is a puzzle. We speculate that the limited use of list prices may be due to the sellers’ interests in both maintaining their informational advantage and not truncating higher than expected offers, especially during periods of economic growth or with more complex properties. Using a two-stage selection correction model, we find that office properties which provide list price information are, on average, associated with lower price outcomes (ceteris paribus) and that these outcomes vary by price cohort and economic condition. It is important to note, however, that while these findings identify a correlation, they do not necessarily imply causation. Our results support the notion that asymmetric information and information signaling play a dominant role in explaining the sellers’ strategic non-use of list price information in the commercial real estate market and that the signaling effect is more pronounced in higher priced properties and during periods of strong economic growth.
Key words
Commercial real estate sales . Negotiation . List

You May Also Find These Documents Helpful

  • Best Essays

    During last week’s research, three testable outcomes were identified: the value will increase if the home is closer to the city, the value will decrease if the home is closer to the city, or there is no direct correlation. Team B hypothesizes that if a property is closer to the city, the value will be higher. It has been determined that the median, mean, minimum, and maximum values should be assessed and examined to determine if this hypothesis is accurate. Team B will be using the mean home prices in group one and two to determine if there is a significant difference in home prices for homes less than 15 miles from the city compared to those equal to or greater than 15 miles from the center of the city. Based on the possible testable outcomes, Team B will use the Null Hypothesis and Alternate hypothesis with the mean prices in group one denoted as µH1 and mean home prices in group two denoted as µH2.…

    • 2176 Words
    • 9 Pages
    Best Essays
  • Satisfactory Essays

    When a buyer purchases residential property from a seller in a standard resale transaction, the seller is required to offer a real estate transfer disclosure statement to the buyer which describes items in the chosen property which, if known, would affect the buyer's interest in the purchase of the property. Such a declaration is standard practice in this state, and this requirement protects buyers against unknown problems which may accompany such purchases.…

    • 522 Words
    • 3 Pages
    Satisfactory Essays
  • Satisfactory Essays

    UOP University of Phoenix

    • 1368 Words
    • 6 Pages

    Hauser, C. (2011, August 24). Sales of new homes fell again in July. The New York Times. p. 6. Retrieved from EBSCO host.…

    • 1368 Words
    • 6 Pages
    Satisfactory Essays
  • Good Essays

    The market equilibration process explains what occurs when consumers and sellers make decisions in an efficient market (McConnell, Brue, & Flynn, 2009). Buyers and sellers own most of the resources in the market and compete to obtain what they want. The efficient markets theory speculates that buyers and sellers are on an even playing field when trading assets and no one has an advantage over the other to make a profit based on analysis and prediction (Efficient markets hypothesis, 2012). Possessing an understanding of economic principles is necessary for entrepreneurs when making essential business decisions. The objective of this paper is to clarify the market equilibration process and establish how it relates to the rise and fall of house prices.…

    • 601 Words
    • 3 Pages
    Good Essays
  • Good Essays

    Atlantis Simulation

    • 737 Words
    • 3 Pages

    From the price of the property, advertising costs and expansion planning the supply and demand chart offers great insight for decision-making. When a company with a large number of two bedroom apartments for rent wants to ensure they are getting top dollar for their rentals. If there is a high demand for two bedroom apartments they may be able to rent properties that would normally rent for $1,000 to rent for $1,200 depending on how high the demand is. Where as if the demand was lower than normal that same apartment may rent for $800. When the demand is low, the company may reevaluate their advertising costs to save for when the demand is high along with the competition. When a real estate company has a consistently high demand or witnesses a market changing factor come into play (i.e. a large company taking up headquarters in the area) there most obvious decision is to expand. When they decide to expand the company will offer them a larger place in the market, in result there will be an increased supply that will change their supply and demand curve and will help them make the decision to again adjust their prices to meet the new demand. This same concept, along with many others, can be applied to any industry to help make educated decisions… if read…

    • 737 Words
    • 3 Pages
    Good Essays
  • Powerful Essays

    Cih Level 3 Assignment 4

    • 3986 Words
    • 16 Pages

    * The Impact of Space. Location is acutely important in the housing market; there cannot, because of it, be perfect information and full and free competition.…

    • 3986 Words
    • 16 Pages
    Powerful Essays
  • Satisfactory Essays

    This week presents the opportunity to learn the maintenance and process of market equilibrium. This assignment will present the Market Theory and its affects on surplus, shortages, and supply and demand. Real estate in the United States (Manausa, 2014) is a market that has a supply of products in demand. The attached graphs will show the increase in demand with a supply equalizing, the supply equalizing with demand, and the decrease in supply with no change in demand.…

    • 518 Words
    • 3 Pages
    Satisfactory Essays
  • Good Essays

    The housing market changes quite frequently and depending on the city, state, and neighborhood. When a home-buyer is interested in purchasing a home they look for what fits their needs, life style, and budget. This is important because it will also determine what type of house they can afford to live in and how much they can get for the amount their budget will allow. Buyers and sellers will look for certain variables when purchasing or selling a home and data must be gathered to make sure that all details match and that all requirements are met. It would be safe to assume that our theory that the larger the house and the more rooms a house has, the more expensive the price of the house will be. The three major variables in our data summary are: number of bedrooms, size of the house, and number of baths.…

    • 416 Words
    • 2 Pages
    Good Essays
  • Good Essays

    Uk Housing Market

    • 726 Words
    • 3 Pages

    The learning of economics begins with the needs and wants of materials. Everyone needs basic things to live their life: food, air, water and shelter. With the advancement of science and technology people desires become more sophisticated, now they don’t need just food they need “ Dominos pizza” or “Mc Donald Burger”, they want to wear designer wears, they don’t like just a room to live in they want buildings or their own home. More the variety increases and become more refined, the economy becomes more composite too. The study of supply and demand, basic concepts of economics is fundamental in today’s property market because even a single economic decision can change the market greatly. “The interplay of demand (the behaviour of buyers) and supply (the behaviour of sellers) determines the quantity of the good produced and the price at which it bought and sold.” David Begg, 2005. The impact of Supply and Demand could be influenced by many factors. “Demand describes the behaviour of buyers at every price” (David Begg, 2005). The demand in rental market increases to buy property if price goes down, however sellers will loss on their houses hence supply will decrease. If the price of property increases, consumers selling their property would make profit, increasing supply though unaffordability of consumer will make demand to fall.…

    • 726 Words
    • 3 Pages
    Good Essays
  • Satisfactory Essays

    Schwartz, B. (2005). San Diego Real Estate -- A Trend to Go National? Retrieved November 17,…

    • 577 Words
    • 3 Pages
    Satisfactory Essays
  • Good Essays

    Condo Sales Case

    • 870 Words
    • 4 Pages

    This case involves an investigation of the factors that affect the sale price of Oceanside condominium units. It represents an extension of an analysis of the same data by Herman Kelting (1979). Although condo sale prices have increased dramatically over the past 20 years, the relationship between these factors and sale price remain about the same. Consequently, the data provide valuable insight into today’s condominium sales market.…

    • 870 Words
    • 4 Pages
    Good Essays
  • Good Essays

    One approach that individuals are using currently to be unique from the crowd and compete with all-cash purchasers in a hot real estate market is writing a homebuyer's letter to a seller. It is not simple to compose a letter that is engaging and personal to convince the receiver that he or she should give the home to you and not someone else. Today, it is always getting harder to win a bidding war. Persons who require financing and about sixty six percent of all home buyers do as well as those with smaller down payments frequently have trouble competing with all-cash buyers, who are able to lure sellers with spike and span offers and quick closings. Also, all-cash buyers may find themselves competing with others who also can come up with the money and this is why a letter comes to help.…

    • 993 Words
    • 4 Pages
    Good Essays
  • Good Essays

    Would you place a personal deposit of one million dollars or more in the publicly traded stock of this company?…

    • 1822 Words
    • 8 Pages
    Good Essays
  • Good Essays

    One to one communication – this plays a very important role in almost everyone’s life. This type of communication normally occurs in face to face conversations however it can also be done via email. For example a doctor they would use one to one communication when talking to a patient, so that they are able to find out what is wrong with the patient and to help them to understand how the patient is feeling so that they will be able to help them and give them the right medication and right help that is required.…

    • 1512 Words
    • 7 Pages
    Good Essays
  • Powerful Essays

    Bettman, J. R., Johnson, E. J., & Payne, J. W. (1990). Consumer decision making. 5079…

    • 3503 Words
    • 24 Pages
    Powerful Essays