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The Economics of Land Transfer and Title Insurance

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  • Miceli, Thomas J
  • Sirmans, C F

Abstract

In the presence of uncertainty over the title of land (due to fraud or error), a legal system can protect either the current (innocent) owner, or a previous owner who claims title. The predominant system in the United States generally awards title to the latter in the event of legitimate claim. Thus, current owners frequently purchase title insurance to provide indemnification in the event of a loss. In contrast, the Torrens system awards title to the current owner, but provides for indemnification of any legitimate claimants. We evaluate these two systems and argue that if transaction costs are low, both promote efficient assignment of title (according to the Coase Theorem), but if transaction costs are high, the Torrens system is more likely to award title to the party that values it the most (namely, the current possessor). Copyright 1995 by Kluwer Academic Publishers

Suggested Citation

  • Miceli, Thomas J & Sirmans, C F, 1995. "The Economics of Land Transfer and Title Insurance," The Journal of Real Estate Finance and Economics, Springer, vol. 10(1), pages 81-88, January.
  • Handle: RePEc:kap:jrefec:v:10:y:1995:i:1:p:81-88
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    Cited by:

    1. Miceli, Thomas J. & Sirmans, C. F. & Turnbull, Geoffrey K., 2000. "The Dynamic Effects of Land Title Systems," Journal of Urban Economics, Elsevier, vol. 47(3), pages 370-389, May.
    2. Matthew J. Baker & Thomas J. Miceli & C.F. Sirmans, 2008. "An Economic Theory of Mortgage Redemption Laws," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 36(1), pages 31-45, March.
    3. Thomas Miceli & C.F. Sirmans & Geoffrey Turnbull, 1998. "Title Assurance and Incentives for Efficient Land Use," European Journal of Law and Economics, Springer, vol. 6(3), pages 305-323, November.
    4. Arrunada, Benito & Garoupa, Nuno, 2005. "The Choice of Titling System in Land," Journal of Law and Economics, University of Chicago Press, vol. 48(2), pages 709-727, October.
    5. Benito Arruñada, 2009. "Property titling and conveyancing," Economics Working Papers 1177, Department of Economics and Business, Universitat Pompeu Fabra.
    6. Miceli, Thomas J. & Munneke, Henry J. & Sirmans, C.F. & Turnbull, Geoffrey K., 2011. "A question of title: Property rights and asset values," Regional Science and Urban Economics, Elsevier, vol. 41(6), pages 499-507.

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