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| The Capitalization of Seller Paid
Consessions Author: Ken H. Johnson, Randy I . Anderson and James R. Webb Start Page: 287 Abstract: Using a hedonic
pricing model, we analyze the capitalization of total seller paid discount points and
closing costs into the price of a house. We hypothesize that sellers are concerned about
the sales price net of total seller paid concessions (SPNC), rather than the exact terms
of the transaction. Since the SPNC is easily ascertained in the negotiation process, we
further hypothesize that total seller paid concessions (TSPC) are fully capitalized into
the sales price. To test this hypothesis, sales price is regressed on a set of control
variables including TSPC. In this framework, TSPC will be positive and not significantly
different from one if concessions are fully capitalized. The empirical results provide
support for the capitalization hypothesis. Negotiation strategies and study limitations
follow from the empirical results. |
