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Flipping houses

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In the boom times of the Real Estate market, “flipping” a home was a term commonly used with buying a property, putting little to no money into improving it, then relying on the greater fool theory (or fraud) to re-sell it for great profits. Now that the bust has settled in the market, Belleville, NJ Realtor® Manny Rosa shares his take on the once-shunned practice. “Flipping is seen as a market evil that was a primary cause for inflated values that led to a bubble in home values which ultimately burst and have cost tax payers billions. But which is the real definition of “flipping?” The answer lies somewhere in between. In a market littered with foreclosures and short sales, it’s important to be able to reduce inventory levels. Legitimate home flippers — contractors and/or investors who spend significant sums of money renovating and improving homes before re-selling them to owner-occupants — provide a valuable service to the housing market. As Kenneth R. Harney writes in his Washington Post column, many foreclosed and short sale properties come with significant problems. This can be in the form of title issues, structural defects, underground storage tanks with potential leaks and other shortcomings. Home flippers step in to fill the void between these distressed sellers and a buying public that could not otherwise afford to purchase these homes. Most buyers cannot obtain traditional financing for these types of homes, and/or do not have the money, time or expertise to improve them to inhabitable condition. Buyers using FHA-insured mortgages (which account for nearly 40 percent of the first-time buyer market now) were prohibited from purchasing many of these homes unless they were “seasoned” for 90 days — meaning the seller had held title for at least three months prior to entering into a contract of sale with the new prospective buyer. The FHA made a change to its policy last year (which was recently extended for another year), which allows sales to occur less than 90 days after title has been transferred to the current owner. There are still safeguards for buyers of such properties, including multiple inspections and appraisals, as well as required construction invoices to document the improvements to the subject properties are verifiable. With those safeguards in place, the 90-day rule should be made permanent or dropped all together. It will allow these otherwise vacant and decaying properties to be removed from the local inventory quicker, removing a blight from those neighborhoods and mitigating the declines in immediate neighboring property values. . .” Information courtesy REALTOR.com

Keith May, Keller Williams, 405-833-2626

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