Sunday, May 15, 2005

Morally Bankrupt Business Plans, Part IV

I'm not sure this is morally bankrupt. It might be illegal, but I doubt it. The real question is whether it would work. There has been much speculation that we're in a housing bubble right now. I tend to agree that we are, and am betting a certain amount of money on it.

The business plan is to see if a small group of dedicated people can pop the bubble. What's needed is a group of dedicated home-buyers. I am guessing that there are several types of home-buyers, e.g. "single unmarried," "growing family," "empty nesters," and so forth. I'm going to need about 4 people from each group, all of which are in a single geographic market. These people will need to be serious about buying a home. They will need to be pre-qualified for mortgages, etc. These people will be motivated to buy, but not overly so.

Then they go home shopping. They go to open houses, look at homes, talk to agents, etc. What's important is what happens when they make an offer. The offer will always be ten to twenty percent *less* than the asking price, with some sort of statement about there being a bubble, and this is a much more serious price.

Is this legal? Definitely the group of buyers are colluding for a lower price. But the question is, in a large enough city (say, Seattle), with a fairly liquid housing market, 15-20 people shouldn't be enough to influence the market. It might be a clearer case of collusion if the buyers were all hitting the same property, but they are not. And it's still a free country. The sellers are free to reject any offer.

In a skittish market though, a group like this could wreak havoc. I hope.


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