Bidding Conventions and the Degree of Overpricing in the Market for Houses

Abstract

How do buyers decide whether a property is overpriced? Do they base their judgement on the simple difference between the asking price and expected selling price? Or do they take into account local bidding conventions—the typical asking–selling price spread in the neighbourhood? This paper explores the implications of bidding conventions for the definition and measurement of the degree of overpricing and the effect this has on a survival model of time on the market. The paper also considers the impact of uncertainty and employs fractional polynomial regression to explore whether spatio-temporal variations in attribute prices affect market perceptions of overpricing.