Quick House Sales: Seller Mistake or Luck?

Abstract

Real estate brokers in the housing market are typically required to enter their listings into the Multiple Listing Service (MLS) system within a short period of time. Some houses sell immediately after being listed with a broker but before entering the MLS system. Given the role of the broker in the transaction process and the possible incentive to urge the seller to accept suboptimal offers, are these houses mispriced? This paper examines the price of houses that sell quickly. A thorough analysis reveals no significant differences between the equilibrium price function for houses that sell quickly when compared with those exhibiting a normal marketing time. In addition, we provide evidence that owners of vacant housing will set lower reservation prices to reflect comparatively higher holding costs vis-à-vis those occupied by owners. The results provide additional evidence that the MLS and real estate broker and mortgage markets are, as an interrelated system, efficient enough to protect buyers and sellers from abnormal pricing.