Flip Properties- Use Our Cash To Flip Properties in Nationwide – Earn Thousands Per Deal

Well,  that was the Blog heading that was posted by someone else but on reading further, I encountered the words ‘easy’ with regard to obtaining a mortage and 2.5% commission to the lender, etc etc etc.

Let’s be honest…..  this is NOT the market to be flipping properties.  I mean, GET REAL!  The banks are clamping down on loans and the property market has dropped,  so where, in all reality, is the profit to come from?

Yes,  you can put lipstick on the pig, but buyers are not stupid – they can see when a property has been rehabbed in a hurry, just to turn a fast buck.

I attended a seminar by a leading investment speaker about 5 years ago, and he advised his students to (and he has been teaching this for about 20 years)!:

1)  Go to an open house and get a look at the guest registry.  Contact the people in the registry, telling them that you are selling the house (then put in an Offer – the idea is to sell the house to one of the ‘lookers’ and close before a mortgage is raised, excluding the REALTOR (R) from the deal).

2)  Go to Home Depot (or equivalent) and buy all the ‘seconds’ paint in one color (ie, all white seconds) and mix it all together in a 40 gallon trash can. What would emerge, would be ONE color – white!  Now this is a good idea, but not used in the way prescribed. Offer to paint the house for the seller, at no charge (read: blood money).

3)  Tell the seller that you have a buyer and offer to plant some flowering plants in the front yard, thereby creating ‘curb appeal’ (During all this time, I can assure you that the listing agent would be asking some questions!

4)  Invite all the ‘lookers’ from the guest registry to the house to arrive at the same time, in order to create a frenzy and have one buyer bidding against the other which would ultimately push the price of the house UP!

Problem #1: The person bringing the buyers is NOT a licensed REALTOR (R)

Problem #2: Think the seller wouldn’t smell a rat?

Problem #3:  Have you ever tried to get information from a REALTORs (R) guest registry?  Best kept secret!

Problem #4:  The likelihood of anyone getting a purchase to close on the exact day that the sale occurs is minimal, to say the least, so interest WOULD be raised and one would be responsible to pay that interest! When that property is flipped,  if the purchase and sale did not go through simulataneously, the IRS would be after their Capital Gains unless you chose to exercise the $250,000 per person tax-free benefit (once every second year), but you’d be nailed on the next flip!

Problem #5: Probably the most important of all – if it could be proven that the buyer came from the guest registry, FULL commission would have to be paid to the agent by the bogus selling agent (or owner, if the purchase/sale went through on the same day), because they would be sued for ‘probable cause’. This commission would be over and above that paid to the agent from the transaction.

Bottom line is that there is no easy way.  One may buy property at a discount but there are risks.  One may obtain a loan through a discount lender, but there are risks (and we have seen the result of discount loans, haven’t we?).  One can buy and sell without a REALTOR (R), but there are risks.

If it seems easy, or rapidly profitable,  there’s usually a catch. Don’t get caught! 

Don’t ever under-estimate the buyer…  even a first-time-home-buyer!  They are simply new at this – not BLIND or stupid! What an insult for them to be treated this way!

The purpose of flipping homes, is to buy at a low price, rehab the property and sell soon after, at a higher price, thereby recouping all costs with an additional bonus profit.  What is the point of buying low, adding rehab costs, labor costs and interest and then selling LOW, which is what is happening in this market?  Anyone who talks you into this scheme, is talking you straight into a LOSS!

 I was chatting to a colleague of mine the other day who was really fired up about purchasing a property (at a discounted price – whatever that might be). He said that as he was in the construction business, he could rehab the property at a low cost and was just looking for ‘investors’. Yeah, right!  I tried to explain to him that his time in rehabbing the place was worth something and although he wasn’t ‘charging’ for his labor, in essence, the profit on the deal would be ‘blood money’. Needless to say, I gracefully declined his generous offer.

So let’s discuss the home flipping reality shows on TV.  These really make me laugh when I do the math, but I get really angry at the message that the show puts out.  On one hand, the math doesn’t add up because the show only gives you SOME costs – not all (for example,  they don’t factor in the closing costs or the agents commission. the agent, I believe does not charge a commission because of the air time they get – I could be wrong but agents commission is not something that is in the costs)!  On the other hand, I really feel for those who go out and try to do this themselves only to find that because the math can’t add up (there are hidden fees that the show doesn’t disclose), the buyers find themselves grossly out of pocket!

But the show is entertaining and they sell advertising based on the popularity of the show. Never mind all those people who lose their shirts finding out that things are not what they appear on TV!  After all,  that is Hollywood and life is quite different.

Some of the things that one has to consider when buying ‘discount’ property is perhaps a neighbor who has a water leak and the water is seeping into your property. This may not be apparent at the time that you buy, however, your foundations are being undermined and slippage can occur, causing not only cracks but, a pulling apart of the house – front from back etc.  Such would be the case of the homes that we have seen on TV where the sub-flooring had to be lifted, due to damp conditions. They make it seem so simple, but this issue can have far-reaching effects.  To repair this type of defect, can range from $20,000 – $100,000!

With that damp, almost certainly comes a mold issue, which requires an expert for abatement and then an inspector to give clearance. These services are not free – in fact they are quite costsly.

A friend of  mine recently expressed concern that her home might have been built on the burial ground of cows, which during the 1920’s had to be ‘covered over’ because they had hoof and mouth disease.  As these cows decompose, they give rise to sink holes, into which homes subside.  I am told that hoof and mouth disease never goes away (don’t hold me to this as I am not a vet), but one wonders what would happen, if the house sunk, exposing the diseased corpses.

I guess this is why one might want to employ the services of a REALTOR (R) who might have knowledge of these things or at the very least, could investigate for the buyer. Realistically, if one were flipping a property and it sunk because it was on a cattle burial ground (as an example), there is no limit to the time span one could get sued – 10 days or ten years! It could still come back on you, even if you were the seller, three times ago. Does that make sense?

These are the things they DON’T tell you on the TV reality shows!

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 ________

Althea Garner
Executive Real Estate
House Of Homes Online
http://www.HouseOfHomesOnline.com

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