Instant buyers are changing the way people buy and sell their homes
A WELL-FUNCTIONING market is one that enables buyers and sellers to execute transactions quickly, easily and cheaply. Take the market for oil, or for blue-chip shares. Lots of buyers and sellers, gathered on commodity or stock exchanges, mean lots of bids and offers. Transactions are speedy and fees low.
Company bonds, by contrast, vary in their tenor (the length of time till they fall due) and coupon (interest rate). That makes it much harder to match buyers and sellers. To create liquidity, institutions such as investment banks act as intermediaries, holding an inventory of corporate bonds and guaranteeing to buy from or sell to their clients at any time for a (hefty) fee.
The more varied a product is, the harder it is to create a liquid market. One of the most troublesome—and important—is the market for homes. No two are exactly alike. Compounding the difficulties, most buyers and sellers are links in a chain. Two-thirds of Americans who are selling a home are also looking to buy another. A delay at one point in a chain holds up transactions all along it. So intermediaries in the property market offer a bespoke service, matching individual buyers and sellers and taking a chunky fee.
Enter i-buyers (instant buyers), who aim to play the role in homebuying that investment banks play in the corporate-bond market....