Abstract

Do pre-sale housing contracts serve to create more construction defects than spot-sale contracts? In this paper, it is assumed that the pre-sale system is placed in the information asymmetry situation between the buyer and the builder, so that the moral hazard of the builder is likely to cause more construction defects. It is noted that defects are caused by a lack of incentive for the strict quality control of the builder. Because the buyer is bound to the pre-sale contract in the situation in which the builder does not provide the buyer with enough information about the construction quality in advance. Therefore, as a preventative measure, we propose introducing a system of disclosure of construction information for the equalization of information and a defects disclosure system that utilizes the market reputation of the developer for indirect benefit equalization.

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