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Foreclosure discounts for German housing markets

  • Purpose This paper aims to investigate the foreclosure discount for the German residential market in the years from 2008 to 2011. Design/methodology/approach The determinants of the foreclosure discount are estimated in a hedonic price model. The analysis is based on a unique data set compiled from three different data sources with 135,000 foreclosed properties. Findings The findings reveal that residential units in foreclosures are sold at a discount of 19 per cent compared to residential units with similar characteristics that are not in foreclosure. Second, a regional pattern can be observed, with discounts being negatively correlated to unemployment risk and liquidity. Third, the model with interaction terms shows that foreclosure discounts are linked to specific property characteristics. Fourth, these object-related risks are typically smaller than regional risks or locational risks. Research limitations/implications Given the highly fragmented system of Gutachterausschusse in Germany, who are responsible for collecting transaction data, we were not able to directly analyze transaction data, but only a proxy for this price information. Practical implications The results can be important for financial institutions that are trying to assess the risk of lending for a specific object in a specific location. So far, banks primarily try to assess the default risk of private lenders by analyzing the debtor's financial position and the quality of the property. The analysis provides insights into which characteristics of a property might imply additional risk, and in which region these risks are biggest. Originality/value To the best of the authors' knowledge, this is the first attempt to analyze the foreclosure discount for the German housing market.

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Metadaten
Author:Tobias Just, Michael Heinrich, Mark Andreas Maurin, Thomas SchreckORCiD
DOI:https://doi.org/10.1108/IJHMA-12-2018-0106
Parent Title (English):International Journal of Housing Markets and Analysis
Publisher:Emerald
Document Type:Article
Language:English
Year of first Publication:2019
Release Date:2022/02/01
Tag:COST; Characteristics of a property; Distressed assets; Foreclosure discount; German regions; Hedonic house price model; Liquidity; PRICE; SALES; TRANSACTIONS
Volume:13
Issue:2
First Page:143
Last Page:163
Institutes:Fakultät Betriebswirtschaft
Begutachtungsstatus:peer-reviewed
research focus:Lebenswissenschaften und Ethik
Licence (German):Keine Lizenz - Es gilt das deutsche Urheberrecht: § 53 UrhG