Microeconomic assessment of the home buying offer and contract process

This report provides a micro-economic assessment of the home buying offer and contract process in England and Wales. The main objective is to identify potential sources of inefficiencies in the current system and, on the basis of these results, to consider ways to address these inefficiencies. To accomplish this objective we provide a formal analysis of a range of aspects and key features in the home buying process. These features include the facts that sellers and buyers seem to be relatively unprepared at their initial encounter, that initial agreements are typically not binding and that individual transactions are often embedded into larger chains of mutually contingent transactions. These features can lead to possibly avoidable costs and delay. Our analysis sheds light on the nature and source of such problems. While our analysis will be informed by stylized facts of the home buying process and the results of a few surveys and empirical studies, it remains foremost a theoretical analysis. Therefore, our main aim is to identify and qualify rather than to quantify potential sources of inefficiencies.