RT Journal Article
SR Electronic
T1 Do Seller Disclosures Affect Property Values? Buyer Information and the Hedonic Model
JF Land Economics
JO Land Econ
FD University of Wisconsin Press
SP 551
OP 572
DO 10.3368/le.84.4.551
VO 84
IS 4
A1 Jaren C. Pope
YR 2008
UL http://le.uwpress.org/content/84/4/551.abstract
AB The hedonic method is widely used to infer the value of environmental amenities that are bundled with real property. The interpretation of hedonic prices as marginal values requires that households are “fully informed.”Yet, there is evidence that buyers are often less informed than sellers. A graphical illustration in this study suggests that asymmetric information between buyers and sellers can affect hedonic prices. This intuition is confirmed by a quasi-random experiment that exploits spatial and information discontinuities stemming from a seller disclosure for flood zones. Results suggest a 4% decline in housing prices in flood zones after disclosures commenced. (JEL Q51, R52)