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Silver Regular Contributor
Dukey
Posts: 676
Registered: ‎07-08-2011

Be aware of greedy flippers as you may not get financing not to mention FRAUD

[ Edited ]

Noticed there are still aspiring flippers in the RE business.  Buy "distressed" properties cheap from auction/REO/short sales, make some improvements like fresh coat of paint and demand 19% more than they paid in 30 days (i.e.., list $869k when only paid $729k or $140k more).

 

Talked to my agent about it and she (an astute seasoned realtor - rare breed) had a great advice I'd like to share with you.  She said stay away as buyer will experience REAL difficulty getting financing due to appraisal.  Think about it - someone paid $729k on 6/22 and lists it for $869k on 7/22. 

 

Comp on same house increased by $140k in a month!  Many banks got smart after getting SHAFTED and downright FRAUD during the halcyon days few years ago where scam artist would sell the house at an inflated value to a friend or relative with real estate agent, appraisers and mortgage brokers in collusion.  Buyer AKA friends/relative literally take the money and run not to mention live until foreclosed without paying a dime.

 

So ask yourself - can I get financing if you buy a property from professional flipper?

 

Caveat Emptor!

Silver Contributor
4rent
Posts: 541
Registered: ‎01-28-2011

Re: Be aware of greedy flippers as you may not get financing not to mention FRAUD

[ Edited ]

If a flipper managed to snatch the house for much much lower than comparable houses then he/she should not have problems resell it. for example if a comparable house (same location, same features, same schools etc) go for 600k, if somehow a flipper managed to get it for 400k (due to cash transaction, not qualified for loan property etc) and spend 100k to fix it up to make it move in ready, then the house should worth 600k the same as other move in ready houses in the area.

 

why cant it be appraised the same as the next door neighbor which was sold for 600k 2 weeks ago? same size, same good move in ready condition.

 

i am not flipper and I dont understand why dukey here call flipper gready? To me its fair and square, at the end of the day the market will determine the value of the house either its flipped or not. To me I dont mind buying from a flipper if the price is fair or even lower than comparable house in the area. I dont care who the seller is.

 

 

 

 

Platinum Super Contributor
Nanomug
Posts: 10,421
Registered: ‎05-30-2009

Re: Be aware of greedy flippers as you may not get financing not to mention FRAUD

I bought a flip years ago pre-bubble in the last downturn and several young relatives have bought flips in the last 18 months.  All got financing either conventional or FHA.

 

What the house sold for 30-60-90 days ago doesn't matter to the current value.  Some of these properties were trashed.  One of the houses my neice looked at stunk, cabinets were all damaged, bathrooms were half unfinished and lots of other problems.  She ran from it.  A fliper bought it for cash, put $125K into and sold it quickly.  It was next door to a friend so I saw the never ending stream of trademen come and go.  It was interesting to watch the month long process.

 

FHA has suspended their 90 day flip rule which prevents a home being purchased with FHA within 90 days of the last sale.  Perhaps thats what the agent was refering to regarding being able to finance.

 

With any house purchase getting a good inspection and doing due dilegence is important in the purchase.  I've seen flips done well and flips done poorly.  I've seen standard sales that were poorly maintained and upgraded.  I've seen every type of sale have its good and the bad.

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happy-piggy
Posts: 17
Registered: ‎05-29-2011
0

Re: Be aware of greedy flippers as you may not get financing not to mention FRAUD

I will never buy a flipper since you simply wouldn't know what they tried to cover up under the "new" paint and carpet.

 

Take a look at this flipper listing in Los Gatos, right below high-voltage transmssion lines. Purchased at $692,500 on Jun 23, 2011 and put on the market today for $949,000.

 

http://www.redfin.com/CA/Los-Gatos/178-Las-Astas-Dr-95032/home/956500

 

 

 

Silver Regular Contributor
Dukey
Posts: 676
Registered: ‎07-08-2011
0

Re: Be aware of greedy flippers as you may not get financing not to mention FRAUD

The agent who may be the owner (wow talk about disclosure) and he admitted that it was a rather quick flip.  Bought or won auction on 6/22 and galls to list it a month later on 7/22 for $140k higher or 19%.

 

One thing for sure - good luck to any buyer as appraisal will not come near asking price of $869k since it was bought month ago for $729k - same property.  It's pretty obvious it's amateur greedy flipper in action and he will soon learn it ain't that easy.



Silver Regular Contributor
Dukey
Posts: 676
Registered: ‎07-08-2011
0

Re: Be aware of greedy flippers as you may not get financing not to mention FRAUD

[ Edited ]

4rent wrote:

 

 

why cant it be appraised the same as the next door neighbor which was sold for 600k 2 weeks ago? same size, same good move in ready condition.

 

i am not flipper and I dont understand why dukey here call flipper gready? To me its fair and square, at the end of the day the market will determine the value of the house either its flipped or not. To me I dont mind buying from a flipper if the price is fair or even lower than comparable house in the area. I dont care who the seller is.

 

 

 

 


Good luck to any buyer as appraisal will not come near asking price of $869k since it was bought month ago for $729k - same property.  

 

Heard many banks are leery of this kind of transaction having being shafted on FRAUDS even now days.  Add to this many deals reported to be falling apart (per NAR cheerleaders) due to the appraisals coming in below with buyers unable to close the gap with seller (won't budge) or cannot make-up the difference with additional cash.

Regular Contributor
Lysistrata
Posts: 175
Registered: ‎04-13-2011
0

Re: Be aware of greedy flippers as you may not get financing not to mention FRAUD

I totally agree.  I hope the greedy sons of bees loose their shirts.  They are largely responsible for the stupid housing bubble along with the permissive lending practices of yesteryear and the lack of reason on the true house-hunters' part.

 

Look at places like this one http://www.redfin.com/CA/Daly-City/46-Carmel-Ave-94015/home/571227

It sold (just a regular sale as far as I can tell) for $361K on May 3, 2011 and less than two months later was back on the market for $474k.  The old listing only has one picture but the description reads

 

"This single story home comes with 3 BDRMS & 2 BATHS. Updated kitchen and bathrooms. Feautures such as granite countertop, stainless steel kitchen appliances, hardwood floors, recess lighting, customed bathroom tile & flooring, dual pane windows and more. "

 

As far as I can tell all they did was change it from ugly pink to really ugly green on the outside and put some mediocre plants in the planter box out front.  There was another listing in DC that basically did the same thing, only in that case there were pictures of the old kitchen showing it was identical to the picture in the new listing (which they used as the first/main photo).

Silver Contributor
Sammy555
Posts: 411
Registered: ‎05-18-2010
0

Re: Be aware of greedy flippers as you may not get financing not to mention FRAUD

Well, sometimes the flippers get burned, too. I've seen attempted flips on the market which have just flopped, with the flipper apparently not understanding the pricing of the local market. I recently saw a listing in Pleasanton where a flipper bought a house for $600K and three months later put it back on the market for $750K. Now what the flipper may have been thinking was that $750K works out to about $330 per square foot for this particular house which is about the median price per square foot for Pleasanton. So he probably figured on a quick sale. Nope. Problem is that $600K, the price the flipper paid, is about the average price of a house in that particular neighborhood of Pleasanton. Now it's true that the particular house that the flipper bought is a bit larger than the typical house in that neighborhood, so that's why the price per square foot number doesn't sound unreasonable. Still, if someone is in the market to buy a house in the $750K range in Pleasanton, they're not going to buy a house which is located in a neighborhood where all the other houses are in the $600K range. They're going to buy in a neighborhood where the other houses are also in the $750K range. Seems that this flipper ignored the basic "Homebuying for Dummies" rule that one shouldn't expect to recoup costs for home improvements to the most expensive house in a neighborhood.
Redfin Open Book Certified
LoansbyJW
Posts: 3,214
Registered: ‎04-30-2009

Re: Be aware of greedy flippers as you may not get financing not to mention FRAUD

Smart flippers resell just below the price of the last closed comparable. If that happens then the home is sold at the market price. When buyers become owners, later to become sellers, I'm sure they also want a higher, yet market price. That's not greed. That's smart stewardship of your asset values.  

 

Buying a flip depends also on what kind of flip it is. Banks aren't the brightest lights on the Christmas tree and often resell homes at a very low price. Is that a bad thing? Perhaps for the bank, but it's better than withholding the house from the market. Courthouse steps auctions is the way most people think flipped homes originate, but that's not always the case. There is a company in SoCal that specializes in FSBO and Probate originated flips. Their home improvements are not just PerGraniSteel Home Depot stuff, but some nice work all in all.

 

If the flipper prices at market, does the sort of work that actually improves the property, and the buyer does extra due diligence, a flip home is not a bad option. Banks - including ours - will finance these homes providing two appraisals reflect that the selling price is a market price.

 

As to the flippers who try and sell at peak price with paint touch ups only "improvements" - I join the crowd and mock them for being dumb***** , They deserve a good healthy dose of FAIL for their own foolishness. 

 

Thanks for reading,

John Wheaton NMLS 653018 | Redfin Open Book Recommended Lender
See all my reviews
Silver Super Contributor
Marcus76
Posts: 1,121
Registered: ‎08-04-2010
0

Re: Be aware of greedy flippers as you may not get financing not to mention FRAUD

The $700k sale was at a foreclosure auction. If you read the note under sold, then you'd see that. If your realtor can't tell the difference between a regular sale and foreclosure auction sale, then they suck.