Do buyer and seller motivations affect transaction prices in commercial real estate markets? Evidence from tax deferred exchanges and other conditions of sale.
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文摘
Heterogeneous buyer and seller motivations are common in real estate transactions. However, there are only a few studies limited to one property type and market that examine the effect of atypical motivations on observed selling price. I investigate several heterogeneous motivations that could have an effect on prices of apartment, office and retail properties in fifteen major metropolitan markets. In particular, I focus on analyzing transactions motivated by tax-deferred exchanges. I find a significant positive price effect related to replacement property exchanges. This result is robust across geographic markets and property types. For example, I observe a price premium for replacement tax-deferred exchanges ranging from 5% in Seattle to 18% in Denver for apartment transactions, from 19% in Seattle to 36% in Chicago for office sales, and from 12% in Seattle to 45% in Chicago for retail sales. This dissertation represents the first work that measures the size of the exchange market nationwide, and defines conceptually and empirically the magnitude of the effect of exchanges on transaction prices in different markets across the country and across property types. The results imply that participants in tax-delayed exchanges, need to be careful because the price they pay in the form of higher replacement property price may offset, in whole or in part, the gain from deferment of taxes.;I also analyze properties purchased by out-of-state buyers, sales that are part of sale-leasebacks, portfolio transactions, or condominium conversions. I find that these special motivations are generally associated with positive price premiums. These results have important implications since they demonstrate not only that various atypical motivations of buyers and sellers have an impact on transaction prices in commercial real estate, but also that this impact is sensitive to the market, as well as to the property type.