Housing Flippers are Flocking to ForeclosuresApril 14th, 2011 by PA - Bloger
Some call it good business, some call it greed. Whichever way you look at it, the fact remains that foreclosures are inundating the housing market and house flippers are seeing it as a hotbed of opportunity.
House flipping – buying low and quickly reselling high – hit a peak during the real estate boom where millions of investors as well as everyday buyers tried to cash in on the real estate wave. When the housing bubble burst back in 2008, house flipping stalled as mortgages became light years harder to acquire. Now, with the up rise of foreclosures and real estate auctions soaring, flipping is back as an investors’ big break to once again cash in on the housing market.
As Huliq.com reports, “RealtyTrac, an investment company that literally tracks foreclosed homes, recently touted 831,574 foreclosures or bank-owned properties sold in 2010. The company also noted that these foreclosures sold at an average discount of nearly 30 percent compared with properties not in foreclosure. At the same time, RealtyTrac noted that many of these same foreclosed homes were then sold within 180 days by the investors known as “house flippers” who target both people and neighborhoods that are facing foreclosure.”
Coincidence? Not likely. With a plethora of websites and resources available on how to flip foreclosed homes, seasoned flippers as well as wannabes are able to track foreclosures nationwide. According to Huliq.com, “… the house-flipping wave that’s hitting most depressed communities … across the U.S. was something that people only did when a great deal presented itself. But, that changed when the home prices went south and the bubble burst… Thus, with the bargain basement prices on many foreclosed homes these days, there are many thousands of quality homes that can be flipped in almost any American town these days. It’s a buyer’s market.”
So, is this a good thing or a bad thing for the economy? The answer is mixed. While investors may see foreclosures as a lucrative opportunity and just good ‘business sense’, house flippers may be viewed as greedy by tracking foreclosures and turning someone else’s misfortune into profit. Business is business, but for the homeowner losing his property, it can be a bitter pill to swallow.
Also, flipping is a little more complicated this time around. According to the Wall Street Journal Online, “Unlike the boom-time flippers, the latest generation needs cold cash, lots of local-market knowledge and strong nerves… Investors compete mostly with other full-time professionals who monitor foreclosure auctions at county courthouses across the country. The bidders often haven’t had a chance to inspect the property or determine whether it’s occupied by tenants, who may be hard to evict.” With stiff competition, houses in major distress and a different world of financing from years ago, those wanting to brave the house flipping biz better know what they’re doing. As Bloomberg.com states, “During the U.S. housing boom, even amateur investors could buy and sell a property within a couple of months and turn a profit. Today there’s nothing amateur about house flipping.”
Yet, some view this venture as not only smart business, but as boosting the economy. With property developers and investors fixing up homes in serious disrepair, some see house flippers as helping to restore home values of neighborhoods as well as creating jobs. “In job markets decimated by the housing crash, flipping is also putting carpenters, construction workers and home inspectors back to work and attracting a new generation of real estate professionals,” Bloomberg.com reports.
Whatever side you’re on, the fact remains that flipping is back and most likely here for quite some time. As Bloomberg.com reports, “Investors expect to be busy for years to come as continued weakness in home sales fuels foreclosures.”
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