There exists an important methodological challenge when dealing with sale price and time‐on‐the‐market variables because both variables are simultaneously determined and related to the motivation of the sellers and buyers. Exploiting the fact that transactions occur over space and time, we propose a two‐stage approach based on instrumental variables (IV) built from information collected from previous transactions. The unidirectional temporal property and the fact that other transactions are exogenous from the perspective of a single buyer or seller are exploited to evaluate the effect of the sale price on time‐on‐the‐market, and the effect of time‐on‐the‐market on the sale price. Based on 29,471 transactions occurring in the suburban neighborhood of Montréal (1992‐2000), the results suggest that, everything else being equal, houses staying longer on the market provide negative information to the market, which results in a lower final sale price, while the final sale price is negatively related to time‐on‐the‐market, indicating that houses of better quality (better amenities) stay less time on the market.