Time-on-market, in combination with the listing price, has an important impact on a home’s transaction price. In a research article in the Journal of Housing Economics, Marc Francke, Yumei Wang en Martijn Dröes (University of Amsterdam) examine the period that follows the time-on-market: the time between the purchase date (i.e., the signing of the purchase agreement) and the date of legal transfer (i.e., the handover of the keys), also known as the time-to-close or escrow period.
This period is negotiable and depends on the opportunity costs and preferences of both buyers and sellers. The authors find that the time-to-close is an important component of the real estate transaction process and has a significant impact on final transaction prices.
Abstract: Unlike many other major asset classes, when buying real estate, much time can pass between the purchase date and the date the property is formally transferred from seller to buyer. Using detailed Dutch housing transaction data, we find that this time-to-close or escrow time, has a positive effect on prices. This effect is separate from the time-on-market. We hypothesize that it reflects the time value of money — if a buyer wants to defer payment to the seller, especially for an asset that typically increases in value, the buyer must pay for it.