subject: Flipping Homes Makes A Comeback [print this page] Flipping homes used to be all the rage: There were reality shows about it, countless shows on real estate TV networks and every Jane and Joe wanted in.
After a brutal real estate market, flipping homes is now popular again. It's the flip side of wholesale investing.
You can't blame real estate investors for trying. The housing boom convinced millions of Americans that homes were ATM machines.
And all they had to do was buy it to make a withdrawal. That strategy worked for years. So much so that people who knew virtually nothing about real estate -- except the burning desire to flip their investmentn -- made tons of cash by buying and quickly reselling homes and condos.
Then the bubble burst several years ago. And everyone got out of the flipping homes party. Real estate values plummeted, foreclosures soared and mortgage bankers went out of business, seemingly overnight.
Banks went belly up, brought down by falling mortgage portfolios. Stung by steep losses, mortgage lenders put the brakes on financing.
Those factors, combined, put the nail in the coffin for flipping homes for the average investor. Only wholesale investors who assign contracts on investment properties and resell to investors and rehabbers were still in the market.
Flipping homes was virtually dead" until now. There's a whole new type of flipper: The real estate investor who finds bargains at foreclosure auctions.
This Flipping Is Different
Before, you could flip homes by buying the traditional way. Today, you're more likely to seek out bargains at the courthouse steps or the foreclosure auction.
And it's not as easy: It takes lots of cash and real estate knowledge. It's not for the novice investor. Real estate investors are competing with large companies who monitor foreclosure auctions nationwide.
Often, bidders don't have the opportunity to inspect a home before they bid on it and don't have any idea of the home's condition. They also may not know if a home has additional liens from other lenders.
But, the sales represent plenty of opportunity for some investors. Property values at are record lows in states such as Florida, Nevada, Arizona and Michigan. Real estate markets are besieged with foreclosed homes. As a result, flippers from around the country, around the world, show up at foreclosure auctions.
With many homes worth far less than their low balance, minimum bids are often very low. Banks want the house gone; flippers want a good deal.
More Homes Sold At Auction
Consider these figures: Sean O'Toole, chief executive officer of ForeclosureRadar.com estimated that 21 percent of homes sold in trustee sales in November went to investors as opposed to the lender, according to an article in the Wall Street Journal.
That's up from 6% a year earlier. Other cities such as Phoenix and Miami are experiencing similar woes. Meanwhile, an estimated 7.5 million homes are behind on their mortgage payments or are in foreclosure.
And lenders want to staunch the growing supply of foreclosed homes. That means it's a good time for real estate investors to wheel and deal.
