Why the narrow scope? A broader scope seems feasible

Real estate transactions comprise both professional services offered by the market and government monopoly in terms of the land registry or similar. If the mandate of the competition authorities restrict the scope of investigations to the market part we indeed have a problem. Perhaps, a consumer protection point of view could broaden the mandate to cover the whole transaction, including the enforcement aspect. Admittedly, a home is not a usual commodity. On the other hand, even the US Republican Administration authorized governmental intervention also to protect customers, as commented by the Republican nominee, Senator John McCain: “We need to keep people in their homes, ..”.1

Leaving the issue of future investigations, mention is made of three studies in real estate transactions which all model transactions in real estate from start to end, and basically as the transactions are performed in practise. The studies does not include accounts of ex post transactions or enforcement costs. This and other problems in assessing the quality of the regulation of the institution is discussed thereafter.

The three studies are:
The German study presents the task of the land registry among other parts of the transaction: the search for or locating of a house, the preparation and closing of financing, the search for deeds and titles of the property, the formulation of the contract as well as the actual conveyance of the property. The English abstract note that “[t]he countries analysed in this study do not vary in the logical structure of the acquisition and conveyance process. However, there are significant differences in the allocation of responsibilities and division of labour between them.”(p.4). The land registry is considered an essential part of the process: “The system of land registry in Germany has certainly proven itself in terms of its overall role and functioning.” Yet, “..comparison with Austria reveals that there is still potential to increase its efficiency..”(p.5).

The Nordic study describes for each of the five Nordic countries, Denmark, Finland, Iceland, Norway and Sweden, their property registration, including the land registries, and the processes of formation of real property units and sale of real estate. Fairly detailed textual and diagrammatic descriptions in the Scandinavian languages were prepared, following an agreed, common structure. The study  adopted methods from the European modelling project and modified them to balance ease of reading with rendering of detail. Translation into English is in process.

The research action ‘Modelling Real Property Transactions’ also aimed at modelling the transactions from start to end of the process, as they were performed in practise. Descriptions were performed both using a more simple format, a Basic Use Case template5,6, and more advanced applications of the Unified Modelling Language7,8. Process models were compared through an ontology-based methodology9, and national property transaction costs were estimated for Finland and Denmark10, 11,12, based on the directions of the United Nations System of National Accounts13.

Taken together, the above studies suggest that at least in the EU it is feasible to model transactions in real estate from start to end, and basically as the transactions are performed in practise. None of the above studies included ex post or enforcement costs, e.g in terms of number and cost of title disputes and boundary disputes, etc., and in number and cost of foreclosure processes. These and other routine ex post transactions should be added to get a more complete account of the quality of the regulation of the institution of property right. Other ex post transactions are more difficult to assess: Is it a quality that a family is turned into the street through an efficient foreclosure? Is it a quality that squatters are evicted briskly? Despite these open questions, the methodologies applied in the mentioned studies seem to offer a more adequate result and hence a better base for policy considerations than studies restricted to mandatory parts only.

References

  1. Obama, McCain call for changes in mortgage giants. The Guardian, September 7, 2008 http://www.guardian.co.uk/worldlatest/story/0,,-7780151,00.html
  2. Internationaler Vergleich von Kosten und Dienstleistungseffizienz bei der Transaktion von Wohneigentum – Optionen für Deutschland (International Comparison of Transaction Cost of Proprietary). Forschungen, Heft 120, Hrsg.: BMVBS/BBR, Bonn. 2006 - Issue 120 http://www.bbr.bund.de/cln_005/nn_25624/DE/Veroeffentlichungen/Forschungen/1998-2006/Heft120__DL,templateId=raw,property=publicationFile.pdf/Heft120_DL.pdf English abstract http://www.bbr.bund.de/cln_005/nn_24612/EN/Publications/Forschungen/1999-2006/120abstract.html
  3. Ejendomsregistrering i de nordiske lande (Real Property Information Systems in the Nordic Countries). Kort og Matrikelstyrelsen, 2006. 340 p. - Dannelse og transaktioner vedrørende fast ejendom i de nordiske lande (Real Property Transactions in the Nordic Countries). Kort og Matrikelstyrelsen, 2006. 588 p. http://www.kms.dk/Matrikelogejendomsdannelse/Nordisk+ejendomsregistrering/Nordisk.htm
  4. Modelling Real Property Transactions http://costg9.plan.aau.dk/  --  COST Domain Committee Individuals, Societies, Cultures and Health (ISCH) COST Action G9 Modelling Real Property Transactions 2001-2005 FINAL EVALUATION REPORT http://www.cost.esf.org/typo3conf/ext/bzb_securelink/pushFile.php?cuid=253&file=fileadmin/domain_files/Others/Action_G9/final_report/final_report-G9.pdf
  5. Alistair A.R. Cockburn: Basic use case template http://alistair.cockburn.us/index.php/Basic_use_case_template
  6. WG Law and Modelling: UseCase descriptions of Subdivision Procedures (2002) http://costg9.plan.aau.dk/UseCases/UseCasesSubdivision.html
  7. Ferlan, Sumrada and Mattsson: Modelling property transactions, pp. 27 - 79 in: Real Property Transactions. Procedures, Transaction Costs and Models. Edited by: J. Zevenbergen, A. Frank and E. Stubkjær http://www.iospress.nl/loadtop/load.php?isbn=9781586035815 
  8. Rados Sumrada: Modeling methodology for real estate transactions. http://costg9.plan.aau.dk/AalborgAug2005/WG2_presentations/Sumrada_Procedures.ppt
  9. Hess and Vaskovich: Ontology Engineering for Comparing Property Transactions, pp. 183 - 201, and Hess and Schlieder: Ontology-Based Development of Reference Processes, pp. 203- 219, both in: Real Property Transactions. Procedures, Transaction Costs and Models. Edited by: J. Zevenbergen, A. Frank and E. Stubkjær http://www.iospress.nl/loadtop/load.php?isbn=9781586035815
  10. Vitikainen: Transaction Costs Concerning Real Property - The Case of Finland, pp. 101 - 118 in: Real Property Transactions. Procedures, Transaction Costs and Models. Edited by: J. Zevenbergen, A. Frank and E. Stubkjær http://www.iospress.nl/loadtop/load.php?isbn=9781586035815
  11. Stubkjær: Accounting Costs of Transactions in Real Estate – The Case of Denmark. Nordic Journal of Surveying and Real Estate Research, 2:1 (2005) 11-36
  12. Stubkjær, Lavrac and Gysting: Towards national real estate accounts: The case of Denmark and other European jurisdictions, pp. 119- 139 in: Real Property Transactions. Procedures, Transaction Costs and Models. Edited by: J. Zevenbergen, A. Frank and E. Stubkjær http://www.iospress.nl/loadtop/load.php?isbn=9781586035815
  13. UN System of National Accounts 1993 http://unstats.un.org/unsd/sna1993/toctop.asp
Erik Stubkjær, est @ land.aau.dk, 2008-09-12