The role of list price in transaction outcomes

Abstract

The purpose of the study is to analyze the effect of list price strategies on two transaction outcomes, transaction price and time on market. The study quantitatively tests two hypotheses concerning transaction price and time one market. This is performed using both a hedonic modelling framework, as well as duration modelling. The models are applied to a set of property transactions for the capital region in Iceland, in total 35,000 transactions between 2014 and 2020. This study concludes that the choice of list price does affect transaction outcomes. In particular, a low list price in relation to market value adversely affects transaction price, and speeds up the transaction process. Thus, the findings confirm an existing trade-off between achieving a higher price, or selling a property quicker. The findings of this study may come to practical use in the sales process of real estate, as it may inform real estate agents as to the expected outcomes of different list price strategies. The results of this study are in line with previous findings under different sales processes, thus suggesting that list price strategies work similarly independent of sales processes. As such, this study increases understanding of the role of list prices.