The Discounts Associated with Cash Deals in the Foreclosed Home Submarket

Holders (lenders) of foreclosed homes face considerable pressure to quickly remarket these properties (Crockett, 1990; Curry, Blalock, and Cole, 1991; Hardin and Wolverton, 1996). In this study, we examine the price effects of cash versus mortgage financing for foreclosed homes. Using a database for the Dallas-Fort Worth Metroplex, we show that cash financing attracts an average price discount of 10% for foreclosed properties. The results are consistent with those of Asabere, Huffman, and Mehdian (1992) and Lusht and Hansz (1994), who found significant price discounts of 13% and 16%, respectively, for properties sold under normal conditions.