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The Journal of Real Estate Finance and Economics

, Volume 54, Issue 1, pp 117–137 | Cite as

Sample Selection Approaches to Estimating House Price Cash Differentials

  • Andres Jauregui
  • Alan Tidwell
  • Diane Hite
Article

Abstract

We extend the literature on house price cash differentials in important ways. First, our paper is the first to employ methods to correct for sample selection bias, using both switching regression and propensity score matching of cash vs. non-cash transactions. We use selection models to produce price counterfactuals for cash and noncash buyers. We also include both average treatment effect and a propensity score weighted selection models. From the selection models, we find that previous studies likely overstate the cash discount. Results from counterfactual tests examining cash discounts suggest amplified cash discounts in areas with close proximity to an environmental hazard; and also a pricing differential based on CBG level income, with purchasers in high income areas more likely to pay a cash premium compared to market participants in areas with comparably lower income, where a cash discount is detected. These results provide useful insights for market participants including real estate appraisers, brokers, and buyers and sellers of real estate.

Keywords

Housing Cash discount Environmental economics Sample selection Valuation 

Notes

Acknowledgments

We would like to gratefully thank participants at the 2014 American Real Estate Society Annual Conference, and journal reviewers for insightful comments.

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Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  1. 1.Department of Accounting and Finance, Turner College of BusinessColumbus State UniversityColumbusUSA
  2. 2.Department of Agricultural Economics and Rural Sociology, College of AgricultureAuburn UniversityAuburnUSA

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