Figure - available from: Journal of Housing and the Built Environment
This content is subject to copyright. Terms and conditions apply.
a Distribution of differences between sale price and appraised value. b Boxplot of differences between sale price and appraised value by year
Source publication
This study adds to previous research analyzing the impact of foreclosure status on real estate sales price by using a Swedish dataset were an appraiser has estimated the market value of apartments before they were sold at foreclosure auction. Appraisal data can address the issue of selection bias and a potential overestimation of foreclosure relate...
Citations
... The factors in vector X include homeowner participation in the foreclosure process, which can help reduce losses, along with credit risk, which lead to an increased risk of over-indebtedness (Melzer and Meltzer, 2017) or holdup issues (Agarwal et al., 2019). A low centrality of the foreclosed house relative to work or government institutions can plausibly influence the search process, thus reducing the probability of matching (Donner, 2020) and influencing the foreclosure discount. We also examine the valuation method effect by considering whether the bank employs an AVM estimate during loan granting. ...
... This finding is consistent Table 1 Linear regression, and two-stage linear regression on the size of the foreclosure discount of houses in a bank portfolio (N-485). with earlier research on homeowners' incentives for high mortgage debt relative to property value (Ambrose et al., 2001;Foote et al., 2008) and liquidity effects (see also Donner, 2020;Forgey et al., 1996). Turning to Model III, we instrument credit risk with time as client and LTV. ...
We examine valuation bias, regulatory loan-to-value limits, and real estate price fluctuations using unique data from two Norwegian banks. We investigate whether automated valuation methods significantly affect foreclosure discounts. Banks using multiple valuation methods tend to report loan-to-value bias by selecting the most optimistic value, underestimating and underreporting risk in declining property markets. This risk increases near regulatory loan-to-value limits, and the findings are robust across homogenous and heterogeneous properties. We recommend reporting automated valuation estimates for all applicable properties and disclosing the percentage of valuations done with different methods to improve transparency and risk comparability between banks.
... Our findings show that minority borrowers had a higher risk of experiencing both mortgage difficulties and other pandemic-induced hardships compared to Whites. As the pandemic abates, the geographic concentration of forbearance, foreclosure, and other health and socioeconomic problems may have lingering effects on the local housing market, such as foreclosure discounts, extensive subprime loans, and long-term vacancies (Barwick, 2010;Donner, 2020;Wang & Immergluck, 2019). Therefore, housing policymakers should prioritize assistance for minority mortgage borrowers, given that their experience of housing stress is intertwined with other hardships induced by the pandemic. ...
Unlabelled:
This article describes racial and ethnic differences in mortgage payment difficulties during the COVID-19 pandemic and examines whether disparities exist in the benefits of the unemployment insurance (UI) program. The sample consisted of 80,797 jobless mortgage borrowers who received or waited for UI benefits between August 2020 and May 2022. Considering individual- and state-level variables in multilevel logistic regressions, we examined rates of mortgage delay in the last month and payment concerns about the next month by racial and ethnic group. Minority borrowers were more likely to have a difficulty in paying mortgage than White borrowers. UI recipients-regardless of race and ethnicity-were less likely to experience mortgage difficulties, but the positive unemployment benefit was reduced disproportionately among Blacks. Blacks were also at a higher risk of mortgage difficulties compounded by other pandemic-induced hardships-loss of household, lack of food, and mental illness-even after the receipt of UI. Findings on the intersection between race and ethnicity and UI suggest that pandemic policy interventions should be race conscious and consider the longstanding and systematic barriers experienced by minority mortgage borrowers.
Supplementary information:
The online version contains supplementary material available at 10.1007/s10901-022-10006-w.
... However, it may be formally challenged only in conjunction with an appeal against the auction itself. The appraisal is meant to reflect the market value for the foreclosed property as if it was sold on the open market in a regular arms-length sale (Donner 2020). The appraisers are professional, in most cases also certified, and external to the SEA. ...
... Market value is the dependent variable in the regression model, while tax value is an independent variable. The appraised market value is a measure of the actual market value of the real property at the time of foreclosure as if it was sold in an arms-length voluntary transaction (Donner 2020). Market value appraisal is commissioned in every foreclosure auction case at the SEA. ...
Proper compensation during foreclosure is essential to any effort to protect borrowers as consumers. However, the effectiveness of consumer protection and other safety nets during foreclosure has been debated within academia. This study contributes to this debate by exploring socio-economic group differences related to the compensatory potential of foreclosure proceedings. It employs micro-level data on foreclosure auctions in Sweden from 2000 to 2014. The results indicate that there is a correlation between high socio-economic status and a greater potential for compensation and that this is likely not explained by appraiser bias. This article discusses these empirical findings in terms of the need for strict consumer protection regulation and other safety nets, such as alternative mortgage products or debt relief, to ensure that there is a potential for compensation for all borrowers in foreclosure, regardless of socio-economic status.
Purpose
This study aims to explore the relationship between house prices and time-on-market (TOM) in Silicon Valley. Previous findings have been inconclusive due to variations in property characteristics. This paper highlights the discrepancy between listing and selling prices and identifies differences among housing types such as condominiums, detached houses and townhouses based on housing orientations and customer groups. Additionally, this study considers the impact of the COVID-19 pandemic and the Fed’s interest rate policies on the housing market.
Design/methodology/approach
The authors analyze 63,853 transactions from the Bay East Board of Realtors’ Multiple Listing Service during 2018 to 2022. The study uses a multiple-stage methodology, including a nonlinear hedonic pricing model, search theory and two-stage least squares method to address concerns relating to endogeneity.
Findings
The Silicon Valley housing market shows resilience, with low-end properties giving buyers more bargaining power without significant price drops. High-end properties, on the other hand, attract more attention over time, leading to aggressive bidding and higher final sale prices. The pandemic, despite reducing housing supply, did not dampen demand, leading to price surges. Post-COVID, price correlations with TOM changed, indicating a more cautious buyer approach toward high premiums. The Fed’s stringent monetary policies post-2022 intensified these effects, with longer listing times leading to greater price disparities due to financial pressures on buyers and shifting dynamics in buyer interest.
Practical implications
Results reveal a nonlinear positive correlation between TOM and the price formation process, indicating that the longer a listed property is on the market, the greater the price changes. For low-end properties, TOM becomes significantly negative, while for high-end properties, the coefficient becomes significantly positive, with effects and magnitudes varying by type of dwelling. Moreover, external environmental factors, especially those leading to financial strain, can significantly impact the housing market.
Originality/value
The experience of Silicon Valley is valuable for cities using it as a development model. The demand for talent in the tech industry will stimulate the housing market, especially as the housing supply will not improve in the short term. It is important for government entities to plan for this proactively.
This study investigates how multiple subordinated creditors and market liquidity in the local real estate market influence the foreclosure discount. It also explores differences in homeowner participation. We use a complete record of all forced Norwegian house sales between December 2001 and February 2018, with and without homeowner participation in response to default on a mortgage or subordinated claim. We estimate foreclosure discounts using an advanced statistical valuation model and repeated sales to explore differences between these approaches. This study expands previous research by exploring the direct and indirect effects of subordinated claims and market liquidity, homeowner participation incentives, and homeowner participation’s impact on the foreclosure discount. Homeowners in liquid markets are more likely to participate in a soft foreclosure sale, thus reducing the foreclosure discount significantly. Default on subordinated claims increases the foreclosure discount, partially through reduced homeowner participation. Our results demonstrate the importance of including the severity of indebtedness and homeowner participation in research on biased valuations and relate the observed foreclosure discount to differences in homeowner participation and market liquidity.
JEL— G21, R2, R51
The present research analyzes the main methods implemented for the assessment of the market value of residential properties in Italian judicial procedures. This value represents the reference for the “starting price” in the subsequent property auctions. An Italian study sample of 514 residential properties assessed by technicians in judicial procedures between November 2020 and March 2021 has been collected.
