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My next house - how do I beat the flippers

Posted by kashka_kat (My Page) on
Wed, Jul 25, 12 at 13:28

Thinking ahead to my next house - I live in a city with a pretty healthy real estate market, maybe even somewhat hot in some neighborhoods. Some depreciation in recent years but really not much - my 2 flat went down in assessment from a high of 175,000 to 155,000. In the most desireable historic neighborhoods there is demand by investors and flippers in addition to ordinary people (like me) looking for a good fixer upper. I want to get a much smaller single family house but twice now when I've called the realtor, the places have already sold - one guy said to a "friend of his" - oh how convenient.

The thing is, if it's aplace I really, really, really want I would offer a bit extra above asking price (that's how I got my current place) but how can you compete when the best places (in terms of location, condition, architectural feng shui - what have you) are sold hours/days after hitting the market, if they even hit the market.

Any strategic advice yall can offer?

Ideally, I wish I could find a buyers agent who could really tune into what exactly I want and just alert me to those things as they come along - but I havent found anyone who would want to hang with me for the long haul. They lose interest and think you're too picky if you dont find anything you like right off the bat.


Follow-Up Postings:

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RE: My next house - how do I beat the flippers

I don't know your neighborhood but the only way to beat a flipper is have a HUGE down payment and raise your price.

Why? A flipper may come in at cash - no seller complains if guarantee close within 30 days (and no questions asked).

Also, mortgage rates are sickly low so the people who qualify can afford more which is primarily why prices are going up briefly.

Everyone likes a sale - if I can buy a home appraised previously valued at $300k for $90k at 3.4% and rent it out to cover my expenses. It is no brainer and results in more income to do it again.

The only advantage is the floodgates are about to open on foreclosures which have been in a holding pattern while the banks fix their paperwork. This should flood the market with inventory and prevent the quick snatch up you are seeing now.


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RE: My next house - how do I beat the flippers

Do you have Redfin in your area, I get instant emails for every new listing in my criteria from Redfin.


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RE: My next house - how do I beat the flippers

To beat the flippers, you have to have first of all have their liquidity and second of all have their information. The only way to have an "inside track" is if you are in a position to be a cash sale and have a buyer's realtor. That is who always gets first pickings of any choice properties. If you don't satisfy either criteria, then you need to either up the price you are willing to pay or downgrade your requirements for your house. If you have to sell your house to afford the next one, do that now and rent until the right one comes along. A contingency sale will never be accepted above an all cash sale, even if it's for a bit more money.

BTW, if you DO have a substantial down payment here but just not all cash (NOT contingent on you selling your current dwelling), find a realtor who seems to "get" what you want, and offer to keep them on a monthly retainer to act as your buyers agent. With the fee to be subtracted out of the commission owed when you buy, of course. That shows a level of commitment that will keep your requests off of the back burner or trash heap rather than being seen as a perennial time waster.


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RE: My next house - how do I beat the flippers

"my 2 flat went down in assessment from a high of 175,000 to 155,000."

Assessments are NOT a reliable indicator of market value.

You need to know what similar completed sales have occurred at ('comps', for comparables).

The 'flippers' are looking for run down places they can do simple upgrades on (often mostly cosmetic) to increase value and then sell quickly.

They often come in with NO contingencies.

No inspection, no financing, no appraisal.
Nothing. Just a wad of cash and a the ability to get a mortgage if they really need it.

I have been doing what these folks try to do for a long time (30+ years).
It does NOT go smoothly every time, and I have had to hold properties and rent them, though this has formed an excellent source of monthly cash income.

One big difference is that I personally do the work in many cases.
I have had a semi-permanent crew in years past, but pretty much have stopped with the market turmoil for the past few years (declining health has not helped).

I can still call on many of the tradesmen I used to employ, having helped them set up their own full time businesses.

I know I can rely on anyone they have hired.
It makes things a LOT easier.

Simple tile jobs I handle.

I have a much older (he is actually retired) floor guy I use for refinish work.
He needs help hauling his drum sander in and out of the truck, and up any steps into a house.
A small concession for the quality of his work.

He would be horrified if you found a single spec of dust in a finish. He spends hours vacuuming every surface.

The floor (of course), even every joint in an older floor, walls, ceilings, trim edges. Everything.
Followed by a tack cloth wipe down.

I had him refinish floors about 10 years ago in a 1955 house that he had original installed.


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RE: My next house - how do I beat the flippers

Hi Kat,
I just went through a very similar experience in this "down" market. Decided it was a good time to purchase a rental/vacation home in an area which bottomed out in 2011, but is now showing signs of appreciation, especially in the lower priced single family home area. I put bids in on 3 different properties and lost out on all of them, 2 being foreclosures which I came in at over asking price without any mortgage contingency. Finally came to an agreement with the 4th seller, not a foreclosure. I still came in without a mortgage contingency as that is who I am competing with in that market right now. I second finding an agent who is on top of the daily hot sheets for new listings and has an extensive network of contacts in the area you want to purchase.You almost have to find out about these listings prior to them being listed to stand a chance. You will want to be ready to jump in that sort of market when you see a house that meets your specs and pricing.
Helene


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RE: My next house - how do I beat the flippers

kashka kat,
We have plenty of liquity. Even so, we have lost out on multiple properties. If you really want to do this, you have to spend hours and hours looking for that right property and 'lose out' on many before getting one. This is extremely time consuming. On IRS tax filings, you can actually count the hours spent 'looking' for an investment property to upgrade yourself into a professional RE investor. It takes a lot of TIME for everyone to find that right property....

The reality is that the agents have to make a living too. They can't make any money unless their client buy/sell somthing. You can't expect them to stick with you for endless hours for a couple thousand of posssible commision. (on a property for 150K, their commision will be barely 1K after all is said and done.)


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RE: My next house - how do I beat the flippers

We just closed this morning on an investment property in a resort area after looking for a year. It wasn't a flipper though, we were looking for something with good long-term rental potential, but much of the competition we encountered was from other investors and second home buyers. The market here is still in the process of finding itself with lots of unrealistic listing prices for today's market, but once a property is priced right it will sell quickly often with multiple offers so you have to be ready to
act fast and that's not the time to come in with a low ball, even if all cash. Even so, we still missed out on quite a few, once literally less than an hour, when we were in the process of completing an offer at full list -- ironically the offer the seller had accepted was slightly lower, but probably also all cash - I don't know for sure but it closed in less than 3 weeks, so all cash is a pretty good assumption.

One pattern I've seen is a series of price reductions until the property hits
the right price and then it goes quickly at or near the last list price. Trulia is a good source for keeping up with pri e reductions here. This market is finally at the point where new listings are starting to hit the market at more realistic prices with good success. That was the case with our property. We noticed it the day it hit the market and acted quickly.

A good realtor is important, and we have a great one. But the real key is to keep up with the market daily yourself for listings and closed prices (our assessor's office updates constantly so as soon as something closes, I know the price). With enough information you become comfortable with jumping in quickly, especially if you have the liquidity to make a cash offer. However, unless you really know what you are doing, I would still include an inspection contingency. Professional flippers and investors may still have the edge there, but I'd rather miss out on something than unwittingly bite off more than I can chew.


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RE: My next house - how do I beat the flippers

Thank u all for your insider persepctives. Just to clarify - I dont want to BE a flipper... no way! I just want to beat them at their game bc they seem to go after the types of properties that most interest me i.e. old ones that have had minimal futzing and updating and still have original architectural features but are still solid and not too much of a goner... AND in a good location, location, location!

What I've noticed is that 2 houses can have the exact same price but be very different in terms of desireability. When they look at the comps they look at square footage and location, but there are certain undefinables like quality of light, view, how the rooms laid out, quality and meticulousness of how the house was originally built, architectural style (ie a classic prewar bungalow pretty much intact vs. a ramshackle thing that wasnt all that good looking to begin with and then had parts added on over the years in a not very appealing way. Not surprisingly, the first one sells quickly and the other one does not. I looked at the comps they used for my current house and was surprised that they were comparing mine (on rr tracks, 1 block from noisy street) to others on nicer, quieter streets. (No, they didnt seem to factor that in - they just assumed our "locations" were comparable.)

Obviously I want the desireable one!

I wouldnt expect an agent to spend hours with me without compensation - or even WANT that (and to have to feel guilty/obligated to buy something) but what would be very useful is a good listener very in tune with my particular esthetic sense (maybe even share it themselves) who would just keep me in the back of their minds so that when something like that came along I could be alerted immediately. Think I'll just get my financial ducks in a row first and then look around for such a person.

By no contingencies do you mean already pre approved for a loan - or paying cash? In my case I have been told I could get a line of credit that would be used for the 20% down payment, and then I either sell my house at my leisure and apply towards entirely paying off the new house) or keep it as rental property.


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RE: My next house - how do I beat the flippers

In my area, it's cash all the way. Any cash offer, no matter how low, beats any offer that involves financing.

I suppose there are other areas where this isn't so, but I had to laugh at the editorial in the Washington Post this week saying that the way to fix the housing crisis is to lower the 30 year mortgage rate to 2.5% percent. Around here it wouldn't matter if it were 0%. In this part of the country you just aren't going to get a property if you have to finance it, especially not the kind of property you're looking for.


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RE: My next house - how do I beat the flippers

A contingency is a condition put on the sale---like the contingency that you will only settle if you can get a buyer for your current home. Many sellers don't want to take the chance that the sale could fall through (or be postponed), if the conditions of the contingency aren't met.

Look, I think, if you truly want to make this happen, you have to get over your fear of inconveniencing a real estate agent. That's how they work--they invest a bunch of time, hoping to help you buy or sell a home, and then they get their money. Good agents won't mind a bit spending that kind of time with you. The one we engaged to sell our house this winter put many, many hours into the sale--he took fantastic photos, he created a slide show for Youtube, he had our home listed on ALL the real estate websites as well as Craigs List and targetted Facebook ads. He constantly fine tuned those ads. He was in contact with us almost daily. He held 2 open houses for us. Because of his efforts, we had over 25 showings during the time the house was on the market. Most importantly? BECAUSE of his time and efforts? Our house sold in under 6 weeks! Oh, and the summer before? when we had our house listed for sale with a different agency? This same young man came to us and offered us a great deal of help and suggestions--even though he didn't have the listing at that point. He's the kind of agent you want to search out--they're not that common, but you CAN find them. He's so successful, that in a slow market, he had our closing at the end of one month, and had SEVEN scheduled for the next month! One of those was a house that wasn't even on the market! It had been, but had been withdrawn, then he got some clients he felt it would be perfect for, and he went to the owners and arranged the sale.

My point is that there are agents out there who do their job enthusiastically. Find one, cultivate a good relationship with him/her and perhaps you'll be one of the first to know when something perfect is about to hit the market. I'll admit that when we bought our first house, we used an agent who was a good friend of my father's. He clued us in about a very desireable house that was going to be hitting the market--we were the first ones though, quickly made an offer--and beat out 6 other couples who were waiting to go through the house. You really do need to use all the assets you can to get the right house at the right price. Good luck.


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RE: My next house - how do I beat the flippers

By removing the mortgage contingency you make your offer as desirable as a cash offer, but give up some of the protections that the contingency gives you. Make sure you will be approved for the mortgage and be very sure that the house will appraise for close to what you offered. You are obligated to go to closing whether your mortgage is approved or not and would lose your earnest money if you are unable. A pre-approval letter won't give you the edge over other bidders in a hot market.
Helene


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RE: My next house - how do I beat the flippers

We bought a house from a flipper. The guy we purchased it from bought it from the bank after they foreclosed on the previous owners in May of 2010.

He did a great job fixing it up. He put it on the market in Sept.

We saw it listed but didn't become interested until he dropped the price $20k in Dec. Went to several open houses and finally made an offer in Jan. He mentioned that he had found a lakefront lot he wanted to buy, but wouldn't be able to purchase it until he sold the house first.

We got him to drop the price another $20k by telling him we were cash buyers and could close anytime.

I'm not sure how others find bank owned properties, but sometimes people will have a yard sale right before put their house on the market.

If I were in the market for a house again, I'd be checking out yard sales.


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RE: My next house - how do I beat the flippers

"I'm not sure how others find bank owned properties"

My RE broker calls me whenever she sees REO that may come on the market soon in case I am interested.

Other than that, they eventually get listed with agents and a sign goes up.

Be prepared for delays.


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RE: My next house - how do I beat the flippers

This may sound crazy, but you could ask property owners if they are interested in selling and see what happens.

Our town is completely built, so people who want new construction must tear down a house and then build on the lot. I know about three people who scoped out lots that they liked that had small, older houses on them. They wrote a letter and said that they would be thinking of selling and if they were, they wanted to buy it. For two of the people, it worked out - maybe not the first lot they chose, but eventually. The other people eventually bought a house offered on the MLS.


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RE: My next house - how do I beat the flippers

kashka kat,

Thanks for starting this conversation. I am in the same boat. Interested in a small neighborhood that has gotten hot in recent months.

Red hot.

This (little) market is moving so fast that properties never make it onto Trulia or Zillow or the MLS feeds. And the listing company doesn't even get a picture up on their own site, nor a sign in the yard. I have informed several agents we are cash buyers, no mortgage or appraisal contingencies, flexible on closing date, etc. Tip me on a property and you can show it to me, but if I find it myself I will deal directly with the selling agent.

Last Thursday morning a realtor tipped me on a new listing but she couldn't show it to me until the next day. When I walked by there was an agent at the property fnishing a showing & willing to show it to me, but I declined out of loyalty to the agent who tipped me to it. The place went under contract that night, so I missed out. As with one a few weeks ago, I probably would have made a better offer than the llc flipper had I had the chance to see the place and make an offer.


I don't see how committing (written contract) to one buyer's agent would help in this situation. Properties don't seem to get outside the listing agency before they are snapped up. A buyer's agent wouldn't know about 'in house' listings except in their own 'house', right? So that won't help.

Hmmmm. I'm thinking it's best to just keep being clear with as many agents as I can what I am looking for and that I am a ready buyer.

Am I missing something?


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RE: My next house - how do I beat the flippers

One year later - I recently looked at little (ie 1 BR, less than 700 sf) houses in hot areas. Both were clad in new vinyl siding, had cheap new vinyl windows, and had ridiculous 3 car garages that were bigger than the house itself.! Obviously I need to get my hands on these before someone else gets them and puts vinyl and all the cheapo cosmetic fixes on them - I want something I can re-side in cedar and make into a sweet cottagey little place..

I have a line of credit now on my current house (at 4% & no fees which I guess is a pretty good deal) which would actually be enough to pay in full for what I want as long as its a fixer upper pre-flipped house. i can't pay for cosmetic fixes I dont want or need, and in fact for my purposes are a liability.

Would having this line of credit be considered "a cash offer?"

Then, I could either sell my place or rent out both units (I currently have a two flat & live in one of the apts).

Thanks everyone for all the tips and tricks! Some really good ones here.


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RE: My next house - how do I beat the flippers

If your credit line works in a way that you can get a cashiers check or wire money electronically from it then it would be like a cash offer.


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RE: My next house - how do I beat the flippers

Yup.. Cash offer is you do not need financing by a bank/lender. You draft a contract indicating after inspection you are ready to close and this typically bypasses appraisal (as no longer interest). They typically only require you to prove you have the funds liquid (and sounds like you do).


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RE: My next house - how do I beat the flippers

If you are still going at this for over a year and have not closed on something, then you are not doing something correctly.
1. Find a Buyers Agent and request that they set you up on an auto listing search that meets your criteria. The new listings will be sent to you the day they are entered into the MLS. Open up your listing alerts every morning... the earlier the better.
2. When you see a new listing that interests you, look at it that morning, or at least that first day. Or lose out.
3. Submit your offer with as large of a down payment as possible or pay all cash.
4. Do not trip over pennies while trying to pick up dollars. ( in other words, do not nickel and dime your offer to try to save a couple thousand dollars when trying to bid on a place that will make you thousands more in profit.


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RE: My next house - how do I beat the flippers

Sorry I wasnt clear - havent been going at this a year. Was information gathering then, and just now gearing up.. Had to devote attention to finishing up work on currrent house. . Your points are still well taken however.

Hmmm . its looking like Ill need to develop the skill set of a flipper, even though Im in it for other reasons.. Ive developed a pretty good eye for old house issues but theres stuff about the mechanicals Im not all that knowedgeable about and had been thinking instead of inspection contingency Id hire someone to give it a quick once over BEFORE making an offer, and have that inform me re how much to offer. But on second thought - youre right, Im sure there's not enough time for that if the property is really good.

BTW, thats another argument for getting at places before they get covered in vinyl - can more clearly see what's going on with them. One of the aforementioned garages had only been sided on the two visible sides- when I went around to the back i was surprised how much rot there was - wood completely crumbled in some places - that's OK for a garage but it sure made me wonder about the house!.


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RE: My next house - how do I beat the flippers

You might also keep any eye out for evidence of furniture being moved out, and no one living there. I had to clear out my aunt & uncle's 1961 house when they moved to a retirement home, which was maintained but never updated (= fixer-upper!).

My uncle would have accepted a reasonable offer at any point in the process but no one asked - it sold for $350,000 in a week with a Realtor.


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