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- Title
A Valuation Framework for Rent-to-Own Housing Contracts.
- Authors
Jaggia, Sanjiv; Roche, Hervé; Thosar, Satish
- Abstract
The housing market crash in 2007, followed by a banking crisis and deep recession, led to many underwater mortgages and a large shadow inventory of unsold properties. A mechanism that may play a role in lowering inventories is the rent-to-own (RTO) housing contract, which in essence is an options contract. This article presents a valuation frame work for RTO contracts under two scenarios; first, with a zero-profit purchase price, and then where both seller and buyer have deadweight costs that affect the contract outcome. This valuation model is believed to be the first analytical attempt to focus on RTO housing contracts.
- Subjects
UNITED States; DEPRESSIONS (Economics); HOUSING market; RECESSIONS; BANKING industry; RENTING to own; VALUATION of real property; TWENTY-first century
- Publication
Appraisal Journal, 2014, Vol 82, Issue 3, p231
- ISSN
0003-7087
- Publication type
Article