Affordability and the Value of Seller Financing / Donald R. Haurin, Patric H. Hendershott.

Format:

Book

Author/Creator:

Haurin, Donald R.

Contributor:

National Bureau of Economic Research.

Hendershott, Patric H.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1695.

NBER working paper series no. w1695

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1985.

Summary:

The typical methodology in valuing seller financing consists of calculating a discount -- the present value of the after-tax interest savings due to the creative financing --and including this variable, along with other characteristics of the purchased house, in an hedonic price equation explaining the house price actually paid. Resulting from this equation is a set of marginal prices corresponding to each characteristic of the house, including the quantity (discount) of creative finance accompanying the house. The central question usually addressed is whether the discount is fully capitalized in the value of the house -- whether the price of creative finance is unity. In our view, one should not ask what the price of creative finance is because this price, like that of other housing attributes, likely depends upon supply and demand conditions. We develop and estimate a model incorporating this dependency.

Notes:

Print version record

September 1985.