I recently found this post on the internet asking if flipping short sales is a good opportunity. After reading this it made me analyze the big picture here.
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If I can buy fully negotiated short sales directly from the agent/broker that represents the lender at 80% of BPO, is this a good flip opportunity?
I have someone that can provide me properties consistently for 80% of BPO before they hit the MLS. I plan to wholesale it for 85% of BPO and list with the same agent that provided me with the deal so he can double end and make a nice commission. Is this realistic in this market? I want to turn properties quick and keep my velocity consistent. The markets I plan to buy are LA and OC counties under 350K (segment with the most buying activity) in decent neighborhoods with desirable schools and then sell within a month's time frame. Has anyone seen the market drop quickly (within 30 days) where it would affect my safety margin. I've been seeing most short sales going for close to BPO or slightly lower. Auction buyers typically are buying at 85-90 cents on the dollar, so my acquisition would be less minus holding and misc fees for funding.
Flippers: What do you think of my wholesaling strategy for short sales... viable for this SoCal market?
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Forsaking sounding "Pollyannaish" here, but isn't this type of business transaction for the sheer benefit of the investor and only the investor bordering on fraud? Granted that the big banks are devilish to deal with in negotiating short sales. I do it every day. I have very little respect or sympathy for the devil no matter how badly it claims to be wounded. I have a lot to say about that subject but don't have enough hard disk space on my desktop to discuss it in detail.
However, I am a California real estate broker who oversees a well respected real estate brokerage and prides myself on always playing it straight and never placing my needs before my client's. That goes for the agents in my office as well. I may be one of the last remaining white hats out there but at least I can bank on having kept my word and integrity as the foundation and cornerstone to continue to build on. In a cyclical industry we must protect whatever we have left in order to survive the tough times. And that does not include riding on the coat tails of another or at the cost of another's misfortune.
I'm an advocate for risk taking as long as all parties are aware of and accept the terms of the deal. Having the ability to procure properties for 80% of the BPO before it hits the MLS smells bad to me. This individual offers properties to investors for less than market pricing for the reward of "earning" two commissions. Smelly, smelly, smelly.
With new government directives released on April 4, 2010 and Fannie and Freddie's versions on June 1, 2010 known as HAFA there are a number of guidelines that include verbiage to prevent short sale flipping. One that prominently comes to mind is that Buyers cannot sell the property again for 90 days. This is meant to prevent investors from "flipping" homes by purchasing at a low price and selling at a quickly inflated price.
Some blogs denounce short sale flipping while others encourage and celebrate it. Which is it? My hands are clean and I think I'll stay clear of playing in the mud but I do feel that this type of business dealing is becoming an epidemic that needs to be addressed. Can I hear your thoughts on this to help me understand if this game is made up of fair players where no one gets hurt?
Diane Wheatley, Broker
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