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The Price Effects of Cash versus Mortgage Transactions

Author

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  • Paul K. Asabere
  • Forrest E. Huffman
  • Seyed Mehdiany

Abstract

This paper investigates the price effects of cash versus mortgage transactions. Our hypothesis that home sales involving all‐cash transactions will sell at discount is borne out by the results of this study. Analyzing a sample of comparable row home dwelling units, we find that all‐cash transactions are associated with roughly a 13% price discount relative to transactions involving financing terms that are typical of the market. Cash is King. The findings are consistent with theories regarding buyer—seller behavior.

Suggested Citation

  • Paul K. Asabere & Forrest E. Huffman & Seyed Mehdiany, 1992. "The Price Effects of Cash versus Mortgage Transactions," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 20(1), pages 141-154, March.
    • Handle: RePEc:bla:reesec:v:20:y:1992:i:1:p:141-154
    DOI: 10.1111/1540-6229.00576
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    Cited by:

    1. Andres Jauregui & Alan Tidwell & Vivek Sah, 2019. "Sample Selection Approaches to Estimating and Allocating House Transaction Funding Price Differentials," The Journal of Real Estate Finance and Economics, Springer, vol. 58(3), pages 366-407, April.
    2. Michael LaCour-Little & Zhenguo Lin & Wei Yu, 2020. "Assumable Financing Redux: A New Challenge for Appraisal?," The Journal of Real Estate Finance and Economics, Springer, vol. 60(1), pages 3-39, February.
    3. Eli Beracha & Julia Freybote & Zhenguo Lin & Michael J. Seiler, 2024. "Time on Market and the Cash Discount for Condos," The Journal of Real Estate Finance and Economics, Springer, vol. 68(2), pages 188-217, February.
    4. Jeffrey P. Cohen & John P. Harding, 2023. "The Bargaining and Contagion Effects of Investors in Single Family Residential Properties: The Case of Denver Colorado," The Journal of Real Estate Finance and Economics, Springer, vol. 67(1), pages 29-64, July.
    5. Andres Jauregui & Alan Tidwell & Diane Hite, 2017. "Sample Selection Approaches to Estimating House Price Cash Differentials," The Journal of Real Estate Finance and Economics, Springer, vol. 54(1), pages 117-137, January.
    6. Kenneth M. Lusht & J. Andrew Hansz, 1994. "Some Further Evidence on the Price of Mortgage Contingency Clauses," Journal of Real Estate Research, American Real Estate Society, vol. 9(2), pages 213-218.
    7. Michael J. Seiler & Liuming Yang, 2023. "The burgeoning role of iBuyers in the housing market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(3), pages 721-753, May.
    8. Ramya Aroul & J. Hansz, 2014. "The Valuation Impact on Distressed Residential Transactions: Anatomy of a Housing Price Bubble," The Journal of Real Estate Finance and Economics, Springer, vol. 49(2), pages 277-302, August.
    9. Youngme Seo & Cynthia Holmes & Mark (Seung Hwan) Lee, 2023. "Examining the Cash-Only Price Discount and the Driving Forces of Cash-Only Transactions in the Housing Market," The Journal of Real Estate Finance and Economics, Springer, vol. 67(3), pages 480-516, October.
    10. Alan Tidwell & Andres Jauregui & Vivek Sah & Andrew Narwold, 2018. "Cash and Distressed House Sales Price Discounts: Dual Sample Selection Spatial Interdependence Approaches," The Journal of Real Estate Finance and Economics, Springer, vol. 56(1), pages 101-139, January.
    11. Paul K. Asabere & Forrest Huffman, 2008. "FHA/VA Financing and Price Discounts," Journal of Real Estate Research, American Real Estate Society, vol. 30(2), pages 191-206.
    12. Marcus T. Allen & Jessica Rutherford & Ronald Rutherford & Abdullah Yavas, 2018. "Impact of Investors in Distressed Housing Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 56(4), pages 622-652, May.
    13. G. Donald Jud & John D. Benjamin & G. Stacy Sirmans, 1996. "What Do We Know about Apartments and Their Markets?," Journal of Real Estate Research, American Real Estate Society, vol. 11(3), pages 243-258.

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