Now, when the stream of foreclosures practically dried out, is the time when I get the requests for foreclosures. I am not talking about REOs, I am talking about foreclosures. So, before, when there were plenty of foreclosures, people avoided it as high risk deals. Now they are interested in foreclosures.
Are they? Or it is an attempt to go back and buy at 2010-2012 prices?
People, who are asking, think that there is an endless source of low priced available properties, so when they do not see “deals” on MLS, they want to turn to foreclosures.
We were working with foreclosures, buying at the court sales for about 4 years, but for about 3 years we are no longer doing it.
When we started, we spent 3 months just going to the court in Deland and watched the process, watched participants, trying to learn the business. And it was a very tricky business. After 3 months we entered the bidding. At that time 2 days out of the week was given to Daytona Beach, and this is what we were watching very carefully. Each day had 3—35 properties on the chopping block. There was a group of people, mostly the same people, who were buying foreclosures.
A few builders, several real estate agents, and newly formed groups, which were taking it to a new level.
And then the number of units started getting shorter, and the crowd of participants started getting bigger, and the prices started going up. And if when we started the most popular properties were about $50K, then they went to $80K, then to $100K… This is with the same profit. You simply now had to pay more to get the same profit from flipping. And, of course, the cost of a mistake was becoming higher…
At some point further participation was not making any sense. Contrary to what people usually think about foreclosures, it was consuming enormous amount of time. It was basically a full-day job tracing the properties, comparing different sources…
It was an art.
And if in our first year we were buying one out of 900 properties, later we were buying one out of 1,500 properties, and then we stopped going. There was no sense in doing it. Prices leveled with the prices for similar properties on the market, and at the auctions people sometimes pays more than we could buy on the market, but without the uncertainty of foreclosure, without pressure of time and demands of cash buys…
And after we dropped out of this business, we started getting requests for foreclosures.
Folks, times changed. Market is very different. Looking back for deals of the past is a waste of time. Deals today are properties, that would greatly appreciate tomorrow, but there are no properties, which are great flip today.
Flips are not the properties, which some uneducated seller put there for a ridiculously low price. Flips are when you buy and add value by remodeling, or by waiting or both.
Flip is not buying properties for half price, so that you can immediately resell them for double the price. This is a silly real estate fairy-tale. Flip is buying a property today, which would appreciate in relatively near future.