Dealers vs. Brokers in Housing

Tyler Cowen points to a WSJ story about a start-up that will buy your house and flip it, so that you don’t have to spend time selling it.

In securities markets, we differntiate between brokers and dealers. A broker brings together buyers and sellers. A dealer buys from sellers, holds securities in inventory, and sells to buyers out of this inventory.

One challenge with trying to be a housing dealer is that it adds another transaction in a market where transaction costs are artificially high. Some jurisdictions have transfer taxes. You might have to pay for an extra title search. Another home inspection. Etc. Also, while a security still accrues interest while it is in inventory, an unoccupied house does not generate rent.

4 thoughts on “Dealers vs. Brokers in Housing

  1. Hopefully we can try these out on a pilot basis without them tanking the whole economy.

    Arnold, I have a question. Feel free to direct me if I missed a citation, but what is your current take, if you have one, on the role of the “shadow banking system” in the crisis?

    I’ve been subconsciously taking Krugman et. al. at their word and it suddenly dawned on me “what, am I nuts?”

  2. Tyler Cowen points to a WSJ story about a start-up that will buy your house and flip it, so that you don’t have to spend time selling it.

    While taxes etc. are a problem here, why is this necessary if the house is in good condition? If you are not have immediate cash needs or have move in an exceptionally short time period, I bet most homeowners lose an addtional $10K – $20K per house using a broker above the 4 – 6% due to Real Estate Agent Fees. (There are plenty of the businesses so there is a market need.)

    • Also the other key part is information on housing pricing is so easy to access, homeowners know what they are losing with a house swapper.

  3. This strikes me as the Silicon Valley version of the “We Buy Houses” signs you see on street corners in practically every american city.

    I’d think there’s a bit of adverse selection here too that would be difficult to overcome.

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