نقش تضمین کیفیت تامین مالی فروشنده: شواهد از دومین وام مسکن

Quality problems that are known to the seller of a product, but will become known to the buyer only after the purchase have the potential to frustrate voluntary exchanges. Where the determination of quality after the sale is cut-and-dried, brand names and unconditional guarantees will bond contract performance. When the problem is more subtle or confounded by the extent of consumer inputs, requiring risk-sharing by the contracting parties, these bonding devices typically are not sufficient. Under the circumstances, seller financing may be an efficient contracting solution for bonding the quality dimension of the contract. This form of financing makes both the buyer and the seller share the risk that the product may not suit the buyer’s needs in the way promised by the seller. This paper provides further empirical evidence on the quality assurance role of seller financing. We consider seller-financed second mortgages in the National Association of Realtors database. Seller financing in second mortgages may be a supplement to first mortgages supplied by conventional lenders. The role of seller financing as a quality assurance mechanism in second mortgages is more complex than its role in first mortgages, but is also less subject to an alternative interpretation of credit rationing than is its role in seller-financed first mortgages. To avoid further complexities, we do not consider second seller financing transactions that supplement first assumption mortgage transactions.

Why does a seller provide financing to the buyer in a property exchange? While the volume of seller-financed transactions in property exchanges is not large, it has been around for a long time and present in many countries. Furthermore, trade credit in retailing and business-to-business commodity exchanges is a form of seller financing. Its volume is indeed quite large. The survival of seller financing, despite the breathtaking pace of financial innovation in recent decades, indicates that this form of financing continues to be a viable market mechanism and that whatever its functions may be, they are of continuing and encompassing importance to consumers.1 Surprisingly, not only is our understanding of the role of seller financing – especially in property exchanges – limited, there is also very little empirical evidence on this topic.2 Following Laband and Maloney (1994), we suggest that seller financing in residential real estate exchanges is a quality assuring signal that has the potential to mitigate the informational asymmetry problem regarding the quality of the property, under conditions of seller and buyer opportunism. Laband and Tirtiroglu (2004) offer empirical evidence in support of this argument, using data on first mortgages available in the National Association of Realtors database for the period 1984–1996. These recent advances take us beyond the conventional explanation of credit rationing as a reason for seller financing in property exchanges. In this paper, we consider seller-financed second mortgages in the National Association of Realtors’ database. Seller financing in second mortgages may be a supplement to first mortgages supplied by conventional lenders. The role of seller financing as a quality assurance mechanism in second mortgages is more complex, but also is less subject to the alternative interpretation of credit rationing than is its role in seller-financed first mortgages. To avoid further complexities, we do not consider second seller financing transactions that supplement first assumption mortgage transactions. Our empirical findings support a quality assurance function of seller financing in addition to the role played by seller financing as a source of credit. We report evidence that seller financing is more likely to occur on older homes characterized by higher informational asymmetries, and that the various contractual features of a mortgage contract at least partially are designed ex-ante to control for bilateral opportunism on the part of both the seller and the buyer of the property. The fact that our data cover a period of years during which interest rates fluctuated substantially permits us not only to distinguish a quality assuring role for seller financing that is distinct from the role played by seller financing in overcoming credit rationing problems but, indeed, also to verify the latter phenomenon in periods of high interest rates. In addition, the fact that we offer further evidence on seller financed second mortgages permits us to reinforce the interpretation that seller financing performs a quality assuring function, at least in part. We first discuss comparatively the credit rationing and the quality assurance explanations for seller financing. Then we offer a detailed analysis of the contractual aspects of seller financed second mortgages and their empirical implications under the quality assurance hypothesis. We then introduce the data and sample construction used to test empirically several predictions. Next is a section on the empirical model and variable definitions. Empirical results follow and concluding comments round out the presentation.

Quality problems that are known to the seller of a product but will become known to the buyer only after the purchase have the potential to frustrate voluntary exchanges. Where the determination of quality after the sale is cut-and-dried, brand names and unconditional guarantees will bond contract performance. When the problem is more subtle or confounded by the extent of consumer inputs, requiring risk-sharing by the contracting parties, the bonding devices typically are not sufficient. Under the circumstances, seller financing may be an efficient contracting solution for bonding the quality dimension of the contract. This form of financing makes both the buyer and the seller share the risk that the product may not suit the buyer’s needs in the way promised by the seller. This paper provides further empirical evidence from the second mortgage market with respect to the quality assurance role of seller financing. Seller financing of second mortgages may be a supplement to first mortgages supplied by conventional lenders. The role of seller financing as a quality assurance mechanism in second mortgages is more complex than its role in first mortgages, but is also less subject to alternative interpretation of credit rationing than is its role in seller-financed first mortgages. Our empirical findings from seller-financed second mortgages make the case for the quality assurance hypothesis stronger.