Deed Types, House Prices, and Mortgage Interest Rates

Abstract

Deeds spell out the legal guarantees the seller makes about a house. Using a house price hedonic with a Bayesian spatial error model, we find deed types dramatically affect a house's sale price. Ten deed types command a discount and one commands a premium relative to warranty deeds. The 27% discount for guardian deeds suggests a principal-agent problem. Certain deed types appear more often in poor neighborhoods. Foreclosure deeds have lower mortgage rates than warranty deeds. The Fair Housing Act and Equal Credit Opportunity Act forbid it, but we find higher mortgage interest rates in racially heterogeneous neighborhoods.