Experimental Design Details
Compulsory Sale at SEA
Compulsory sale of real estates is handled by a separate sale division within SEA, which consists of different sale sections located in Luleå, Falun, and Helsingborg/Skövde. Each section consists of a manager and approximately 10 case-handling officers. A case is not appointed to a specific case-handler. Rather, the strategy is to solve all tasks as a team. This means that several different case-handlers may be involved in a specific case. The case-handlers may request support on legal issues from Senior Enforcement Officers (swe. kronofogde), who organizationally adhere to a different division.
All case handling starts in Luleå, where appointed case-handlers register new applications for compulsory sale. This is the only task that these case-handlers perform. The majority of the applications originate from either a mortgage creditor, invoking a verdict or order-to-pay with the right the payment by power of the lien established, or from enforcement sections at SEA, invoking attachment of the property. Upon registration in the case-handling software, each case is appointed a unique case identification number by the software. The case-handlers review the application for incomplete information. Once the application is complete, the case-handlers commissions a market value appraisal of the property from an independent, authorized, and professional appraiser according to locally procured contracts. Normally the appraisal is requested to be completed within three weeks.
When the market value appraisal is completed, case-handling responsibility is turned over to case-handlers at the different sale sections, depending on where the property is located. These case-handlers, which are never the same as the initial case-handlers reviewing the application, review the appraisal document and then decide whether the property should be sold at auction or by a broker. There are legal criteria that guide this choice. For most normal housing properties the main determinant is which sale format is projected by the case-handler to result in the highest sale price. Historically, SEA has sold almost all properties at auctions. This means that there is very little operative experience of handling brokered sale.
If the decision is to sell the property at an auction, the next step is to plan an auction date. Once this is decided, a date for the public viewing of the property is decided in collaboration with the local enforcement sections, since enforcement officers carry out the viewing. These dates, together with information about how much debt the property is attached for, are communicated with the stakeholders in a formal notice five week before the auction. The auction is publicly announced and advertised on the internet three weeks before the auction. The viewing normally takes place about one week before the auction.
The auction takes place physically at the SEA office closest to the property. The auctioneer is either a case-handling officer from the sale section or a senior enforcement officer. The auctioneer may conduct the auction via video link. The auction format is English-style with ascending bids. There is no reserve price, but the auctioneer informs the intending buyers that the property may not be sold unless the winning bid covers the costs and any debt with senior lien (swe. skyddsbeloppet). This amount is pre-determined before every auction and is based on the costs in the case and the claims from the mortgage creditors. The auctioneer also informs the intending buyers that a bid may be rejected if it is probable that a considerably higher price will be attained at a subsequent auction or by selecting a different sale format. This exact amount is not disclosed, since it is at the discretion of the auctioneer, primarily based on the number of intending buyers and bids, and whether there has been a previous attempt at selling the property. If the bid is accepted, the buyer immediately has to make a down payment amounting to 10 per cent of the winning bid, or the costs if they are higher. The auction normally last 30-60 minutes.
If the bid is not accepted, or if there are no bids at all, the auction is closed. If it was the first auction, the case-handlers then ask the creditors whether they request a second auction. In practice, the creditors always request a second auction, because it does not incur any additional costs. In this case, the case-handlers plan for a second auction and follow the same protocol as described above.
If it was the second auction, the case-handlers also ask the creditors about a request for a third auction. It is quite uncommon that the case-handlers agree to a third auction, which follows from the legal regulation. Since the creditors know this, they rarely request a third auction. Upon two unsuccessful attempts at selling the property on auction, the case-handlers close the compulsory sale case and bill the creditors the costs. The costs are divided according to the number of creditors in the case.
If the case-handler instead decides that the property should be sold by a broker, he or she communicates this intention with the stakeholders so that they may manifest any objections to this sale format, usually within seven days. When this deadline has expired, the case-handler commissions a broker according to a publicly procured contract. The current holder of the contract is Svensk Fastighetsförmedling, which is a brokerage house with national coverage. The broker may not refuse a commission. The case-handlers determine by which date the broker has to complete the sale at the latest, normally within three months. The broker then handles the sale, including viewing of the property, contacts with the owner(s) and intending buyers, and bidding. The broker informs intending buyers that it is a compulsory sale before the bidding starts. SEA case-handlers decide whether to accept the winning bid in the same way as for an auction sale.
If the broker does not receive any bid at all during the appointed time for the sale commission, or if the SEA case-handler decides that the winning bid is too low, the case-handler decides that the property instead should be sold at auction. The only exception is if the creditor refrains from auction sale. In that case the case is closed. Otherwise, the case-handler plans for an auction according to normal protocol. This auction is regarded as the second attempt at selling the property, which means that if the auction does not result in sale, the case is normally closed.
A compulsory sale case may be revoked at any time by the creditors. Unless all creditors revoke the case, case proceedings are continued. If the case is revoked by all creditors, the case-handlers bill the creditors for all costs in relation to the number of creditors. The case is then closed. There are two main reasons for revocations: either the debtor pays all debts, or the debtor reaches a settlement with all creditors about an alternative solution, such as voluntary sale, or forbearance, such as a repayment plan. The creditors may also request that SEA defers the proceedings for a specific time period. The case-handlers automatically comply with such a request from all creditors.
The time line for compulsory sale cases at SEA is quite short. According to the law, a first attempt at selling the property should be made within four months. Historically, the median number of days until the first auction was 113 days for housing real estates between 2010-2014.
SEA handles 3,000-4,000 compulsory sale cases per year. This includes both real estates and tenant-owned apartments. Historically about 70 per cent of the cases pertain to sale of real estates. The total number of actual sales per year is 700-1,100.
In summary, the following outcomes are possible in a compulsory sale case at SEA:
1. Revocation
2. Not sold
3. Sold
Other variables collected
The intervention variable is a dummy variable with value 1 for cases randomized to brokered sale and zero for auction sales.
Other variables collected:
1. Property market value: continuous variables measured in tSEK.
2. Property tax value: continuous variable measured in tSEK
3. Property location (municipality level): categorical variable with dummies for the municipality where the property is located.
4. Property tax code: categorical variable with dummies indicating type of housing property.
5. Number of property owners: dichotomous variable with a dummy for more than one property owner.
6. Number of sale attempts (both auction and broker): dichotomous variable with a dummy for more than one sale attempt.
7. Changed sale format from broker to auction: dichotomous variable with a dummy for cases that was randomized to the treatment group but eventually sold at auction.
8. Changed sale format from auction to broker: dichotomous variable with a dummy for cases that was randomized to the control group but eventually sold by broker.
9. Case-handler identification: Dummies indicating which SEA case-handler performed the assessment of inclusion criteria and randomization (de-identified).
10. SEA section identification: Dummies indicating which sales section the case-handler belong to (de-identified).
Analysis
Since all objects assigned to treatment (to brokered sale) might not lead to an actual sale by the broker, we estimate intention-to-treat parameters.