Seller Over-Pricing and Listing Contract Length : The Effects of Endogenous Listing Contracts on Housing Markets

This paper examines how seller pricing decision influence listing contract length and how these decision affect price and liquidity in housing markets. Because list price affects broker effort required to sell the property, brokers respond to seller overpricing by increasing the negotiated listing contract length. At the same time, sellers respond to overpricing by increasing the negotiated listing contract length. At the same time, sellers respond to longer listing contracts by adjusting their list price strategy. Both list price and length of marketing time affect broker sales effort and therefore a property's realized selling price and liquidity. Analysis of house transaction data from Virginia indicates that greater over-pricing by sellers prompts brokers to pursue longer listing contracts, which subsequently lengthen marketing time but increase selling price. The results reveal a novel transmission mechanism from higher list price (which induces longer contracts) to selling price and liquidity