Relationship between Real Estate Pricing and TOM - Book Report/Review Example

Due: Relationship between real e pricing and TOM Introduction There exist some controversies betweenthe relationship between pricing of residential property and the price at the marketing time. This paper intends to investigate the relationship that exists between the time of property selling and the transaction price of residential property with Rutherford, Anglin, Springer (2003) etc. showing that a positive relationship exists and the relationship is akin to risk and return trade off. The paper will give a detailed review on the subject of real estate pricing based on what other writers have given. According to Zhonghua Wu, the two metrics are almost universally accepted in the literature of residential property pricing, as they are jointly determinable. However, quite a big number of the empirical estimations in such field are not really simultaneously estimated through use of 2SLS. Instead, majority of these metrics’ estimates in this field of study more precisely estimate marketing time and price by relying on the presence of each other. There are two basic arguments put forward as to why it is not necessary to investigate the relationship between marketing time pricing and the transaction time price in property intended for production of income production. The first argument claims that there is no sense for recognizing a tradeoff between price if commercial property and their time of marketing since benefits accrue to the property owner during the period of marketing unlike the residential property. Second argument claims that, due to scarcity of transactional data on property for generating income, marketing times as well as other required variables, it is impossible to carry out such an analysis. However, this paper will conduct an investigation into this area based on what authors of the related discipline have said. Discussion Some literature review on this discipline tried to look into the relationship that exists between discount rates of property and prices of property by application of canonical regression. In the study, discount rate of property and the time to sell property was modeled as functions of age, size, down payment, location, and quality and sale transaction time. Interestingly, the research showed a positive and substantial relationship between selling time and discount rates. This suggested that property duration and property price are possibly related putting into consideration the inverse relationship that existed between cap artes and price. However, this study was not easy to conduct due to scarcity of data. Other researchers like Martin (2003) also noted the challenge with data collection and the problem of settling for property rents instead of prices. These ones established that there was no relationship between marketing price and rents of property. Researchers like Brown addressed the problem of data inadequacy by majoring on the length of time taken by a market to adjust for differences of information between valuations of open market and market transactions. This noted that the market state determined the time to rent. Following the recent availability of data for property pricing though disdaining duration of property, various works have recently started to look into the various factors that determine prices of residential property. These include the work of Lambson, Slade (2004), McQueen, Thomas (2005), Guntermann and Johnson. All these studies among many others established that, out of state purchasers end up paying more for land values issue, multi-family properties, industrial and commercial properties vary in the response of pricing to contamination, with some sort of effect referred to as “vintage” existing in pricing for hotels, railway stations for commuters also contribute to pricing of properties that are some distance near, and agents of real estate often do not effect multi-family per-unit consideration. The application of time of marketing in hedonic approximations and price of property in duration approximations is almost universally accepted. Other sources of literature indicate that the real selling price of residential real estate in US often vary from the list price. However, many researches indicate an inverse relationship that exists between TOM and selling price. There is a belief that properties that are correctly priced tend to sell within the time stipulated for the contract of the listing agent. Properties that are overpriced often tend to sell slowly, therefore stay in the market longer, and finally the contract of the agent expires. This forms the foundation for conducting Comparative Market Analysis (CMA). A CMA is meant for helping both consumers and agents in making decisions as to the listing property correct price. This study relies on collection and analysis of data in a particular geographical area that prevailed within a period of six months and if the information is unavailable, the researcher should look for the same data from a neighboring place. The purpose of this research is to establish the relationship that exists between CMA, list price and TOM. Therefore, CMA is found to be a powerful and significant tool for listing agents to give their recommendations as to the properties listing prices. Various factors have been given as potential contributors to Listed Residential Real Estate TOM. There are other factors that are specific to the property which possibly influence the real estate property TOM. These predictors have been reached at after analysis by other researchers. They include the following: prices per square foot; sold prices over or under the CMA; change in rates of state unemployment; number of bedrooms; total number of bathrooms; variation in the rates of conventional mortgage for a period of three to four months; square footage; year of built among other factors. A challenge in measuring TOMs arises due to the fact that TOM is a discrete number and can not be negative. These challenges are overcome by use models for comparisons which are Tobit model and Cox proportional hazard model. Conclusion To study the idea that properties which do sell within the duration of the contract of the listing agent, it is clear that CMA is not the only factor that affects (Time on Market) the TOMs of listed real estate. It is necessary to note that many other factors do contribute to TOMs like availability of a swimming pool in a property, size and number of facilities like bathrooms etc. Works cited Howell, Sebastian. Fast Real Estate Profits in Any Market: The Art of Flipping Properties Insider Secrets from the Experts Who Do It Every Day. Ocala, Fla: Atlantic Pub. Group, 2006. Print. Floyd, Charles F, and Marcus T. Allen. Real Estate Principles. Chicago, Ill: Dearborn Real Estate Education, 2002. Print. Alvis, Susan S. How to Buy Real Estate Without a Down Payment in Any Market: Insider Secrets from the Experts Who Do It Every Day. Ocala, Fla: Atlantic Pub. Group, 2006. Print Alvis, Susan S. How to Become a Million Dollar Real Estate Agent in Your First Year: What Smart Agents Need to Know Explained Simply. Ocala, Fla: Atlantic Pub. Group, 2007. Print. Sirota, David. Essentials of Real Estate Investment. Chicago: Dearborn Real Estate Education, 2004. Print Richard, Dan G. Real Estate Rainmaker: Guide to Online Marketing. New York: John Wiley and Sons Ltd, 2004. Print. Geltner, David M. Commercial Real Estate Analysis and Investments. Cincinnati, OH: Thomson South-Western, 2007. Print Lucier, Thomas J. The No-Nonsense Real Estate Investor's Kit: How You Can Double Your Income by Investing in Real Estate on a Part-Time Basis. Hoboken, N.J: John Wiley, 2006. Brown, Stephen J, and Crocker H. Liu. A Global Perspective on Real Estate Cycles. Boston: Kluwer Academic Publishers, 2000. Print Internet resource. Riley, Rowan. Real Estate. New York: Ferguson, 2010. Internet resource Read More