Flippers - the whipping boys for many who believed they played a big role in pumping up the housing bubble - are being criticized again.
Some are raising the alarm because through April of this year roughly 6,000 homes - or 5 percent of all housing that has been purchased in California - ended up being flipped.
There are a couple things wrong about fanning fears that flippers are parasites.
For starters, they never went away - at least in the Manteca market. As prices were dropping in 2007, honest-to-goodness flippers - those who make their living by fixing homes up and reselling them while committing 100 percent cash to the purchase - stepped up to the plate. Buyers were leery of purchasing many homes that had been vandalized by disgruntled owners who were foreclosed on or squatters. One home - a 4,200-square-foot McMansion in the Woodward Park neighborhood south of the 120 Bypass on a 12,000-suare-foot cul-de-sac lot - was listed by the bank in 2007 for $220,000. Buyers interested in occupying the home avoided it like the plague once they saw the home’s inside. That’s because copper piping had been stripped from the two-story home, both the front and back yards were about as green as Death Valley in August, there were several broken sinks, and graffiti on several walls.
A Manteca investor who specializes in buying homes, fixing them up and either renting them or reselling them bought it for $220,000. Before he did, he made an assessment of how much damage there could possibly be and what it would take for him to fix it. A check discovered only the copper piping between the first and second n floor that went to two bathrooms was missing. It required pipe, new sheetrock, two new sinks, a paint job, and turf with some colorful plants in front. He was able to sell the home three months later for $260,000 and even had multiple offers at a time when homes went begging.
The second, and most important thing, are the flippers of today are not the flippers of 2003 through 2006 that used primarily zero down loans to buy mostly new houses and often more than one at a time. It typically takes five to six months to build a home during which time the price often jumped anywhere from $10,000 to $20,000. Buyers interested in homes to live in were either frustrated because of waiting lists or they wanted a home without having to wait six months for it to be built quickly snapped up the homes flippers put back on the market without occupying. Buyers of such homes didn’t flinch because they assumed prices would keep climbing.
Some developers tried to cut off such flippers by refusing to have their preferred lender service them. That didn’t stop them. They simply found a lender willing to loan them the money.
Flippers today have to have either cash or extremely substantial down payments. They also are buying properties that need work.
They add value to the homes before they flip them. Most buyers don’t want a house they have to fix up when they move in.
By comparison, the fippers during the housing bubble were pure speculators.
To contact Dennis Wyatt, e-mail firstname.lastname@example.org