During the pandemic housing boom, cash was king even more so than normal. As buyers were trying to get their offers accepted in a sea of bids a new type of company was formed. These new companies would help some buyers stand out. They were known as power buyers. They would make a cash offer on a house to entice the buyer to accept the bid. The power buyer would buy the home and then sell it to the wannabe buyer once they got financing. The company would of course charge a fee for facilitating the transaction. However, as rates jumped and bidding wars ended power buyers made a lot less sense. This not only impacted future business but current clients as well. The Wall Street Journal report on one of these companies Ribbon…(WSJ)
- “But last year as mortgage rates surged, some Ribbon customers backed out of their purchases or needed more time to get financing. That left the company owning nearly 400 homes, according to property records analyzed by research firm Attom Data Solutions and confirmed by the company.”
Of those 400 homes, half are hoping to be sold to the original client while the remaining 200 will likely be sold on the open market for a loss no doubt. But don’t you worry Ribbon is already developing new products before it restarts. However, they are unlikely to get the chance. Higher rates don’t just mean fewer potential clients but also fewer potential investors…
- “Some executives said they don’t expect every power buyer to survive. Many relied on venture capital to grow during the height of the housing market, but they are unlikely to raise as much money now.“