Special offer

Unethical Property Flipping .. Canyon Lake hit the hardest.

By
Services for Real Estate Pros with Pacific Servicing

Property Flipping.. The Unethical Way

Part of the reason values are as screwed up as they are is due to the overwhelming amount of buyers who think they qualify to flip a property from watching one episode of the grossly overrated flip this house television show on HGTV. They go out, find a "good flip" and proceed to purchase. They usually buy a property under fair market value, but lately property flippers don't care what market value is, they just look for the highest amount an appraiser can put on a property and the lowest amount they can get it for.

There is an area 30 minutes north of where I live ( I live in Temecula ) called Canyon Lake CA 92587 . Unethical flips are just starting to take their toll in that community. You have a lot of agents who slam these buyers in Homes that they claim are "excellent deals" only to see them resell for hundreds of thousands more within months. Now normally nothing seems wrong with this process, but often times if you look into the property history, mls history, and really study the home you will see they unethically flipped the home.

I saw one just the other day. Last purchased for $650,000, Flipped for $850,000 (the buyer went 100% financing, no surprise) and one year later, the property is in foreclosure again. Now I look even further, and realize the property flipper had the home on the market for $700,000 on the local MLS with a Realtor who I wont mention, yet it Sold for $850,000. No concessions noted in the MLS, yet anyone with half a brain knows the end buyer found the highest appraisal they could get, and pocketed the cash, most likely never planning on moving into the home but just to take the cash and skip out on it.

Well this particular home is now on the mls for $495,000 And just went Pending. It is bank owned, and it has literally killed property values in the neighborhood. It went from a good deal at $650,000 to an over inflated flip at $850,000 and now its another dead lawn home priced at $495,000 and yet I can bet this process will repeat itself again due to it being marketed on the mls as a "steal of a price"

Canyon Lake is non conforming. You can have a million dollar home with an awesome lake view or better yet lake front home next to a $400,000 beat up old home. And until appraisers and lenders address the issues, unethical property flips will continue to occur in there. And its very unfortunate. It was voted safest community in California, several homes in there are priced in the multi millions, yet you have 3-4 bank owned homes every block to in my opinion to the fact that when people flipped properties they did anything they could to attract a "back end buyer" and would in essence put a Costco worker in their home if it met them making $100,000+ on the flip.

There needs to be stricter seasoning requirements on lenders, requiring house flippers to hold the home for at least 90 days, and to prove how they got someone to pay max appraised value when they didn't even bother to replace the dead lawn or dirty carpet inside. I think until lending tightens up on flips the market will continue to be in a chaotic stage, especially in areas like Canyon Lake where an unethical appraiser can easily turn a $500,000 home into a $1,000,000 appraisal and fool the lenders into over lending on these properties.

I really think someone should step in! Because with all these bank owned "steals" its going to attract these type of flippers and the market will repeat itself all over again. Any thoughts?

Posted by

 

 

Ryan Case - Partner

Pacific Servicing, LLC

Ryan@PacificServicing.com

(800) 313-9050 - Office

(951) 760-3170 - Mobile

(951) 501-2926 - Fax

ps

Comments (5)

Doug Aaserude
Inactive until May. 2009 - Beaverton, OR
Broker
nothing wrong with cosctco workers. my cousin worked for them for 27 years and retired a multi-millionaire at the age of 45,
Aug 07, 2007 10:31 AM
Ryan Case
Pacific Servicing - Temecula, CA
There is when theyre making $12/hour and buying a $800,000 home... I dont know a costco worker, i didnt say owner or district manager... that makes enough to afford a home in Canyon Lake or southern california for that matter. And that has nothing to do with this post. Its about unethical realtors and buyers participating in cash back flips, knowing the end buyer can't afford it or is buying it for the wrong reasons.
Aug 07, 2007 10:38 AM
Dan Tobias
Rodeo Realty - Northridge, CA
Northridge Real Estate Expert
Ryan - I have seen it happen before, and it will continue to happen when you have dishonest people involved.
Aug 07, 2007 10:57 AM
Ryan Case
Pacific Servicing - Temecula, CA
When do you think lenders will eventually come around to realize and catch on to these trends.. Its ruining all the legit property owners who work hard to improve their properties, and to do the things needed to maintain their value. It also kills them because when a neighboor sells for $850,000 they think thats their value, they refi, then the "850k" comp forecloses and sells for 495,000 and now they just lost their butts and owe more than their home is worth! Its ridiculous! Its just creating more foreclosures!
Aug 07, 2007 11:11 AM
Anonymous
Roger Marid
I would have to agree with you Ryan. Very honest and ethical post. Not many real estate professionals are ready to admit that a good portion of why real estate went up so fast and you had "unethical flipping" is because of themselves wanting to make a quick check. A++
Aug 08, 2007 08:04 AM
#5