[quote author="usctrojanman29" date=1245126694][quote author="JVNA" date=1245124827][quote author="Geotpf" date=1245121877][quote author="usctrojanman29" date=1245120786][quote author="OCCOBRA" date=1245120448][quote author="traceimage" date=1244993606]10 Aberdeen, in Northwood. Apparently it was a foreclosure that sold for $625k in May. It came back on the market yesterday at $779,990. It's been all renovated and looks pretty nice (although a little over the top for my taste). We were there for maybe 15 minutes, and we probably saw 5 different groups of people (all Asian) come to take a look at the house. While we were there, we overheard someone asking the owners (who were there) if they buy foreclosures and then flip them, and they said yes. So anyway, I just checked on Redfin, and the house is already in backup offers! I was kind of hoping the house wouldn't sell, because the flipper owners looked so smug and annoying, but it sold in a day! Unbelievable. Must be nice to earn $150k in a month...less renovation expenses, of course.</blockquote>
I'll believe it when it actually closes. The way the Jumbo market has frozen with high rates and angelic supporting data, plus lets wait for the appraisal that has been killing deals left and right i think these flippers may be selling this home many times before they cut their losses and dump it at a loss...</blockquote>
Yeah, it will be interesting if the appraisal totally disregards the previous sales amonut of $625k. Even if the flippers provide the appraisal with receipts of all the upgrades I'd bet it wouldn't come close to appraising for $780k.</blockquote>
That's a good point. If appraisals are really by the book, it would be impossible to make money flipping houses, unless they start with a house that was underpriced for the condition in the first place (which is at least semi-likely with an all-cash auction purchase, I suppose). That is, the appraisal should show the house to only be worth what they paid for it plus the amount of money they spent fixing it up, with no profit, other than possibly an hourly rate for their labor if they really did do the grunt work themselves as opposed to hiring somebody to do it. Of course, even then, there are transaction costs which need to be subtracted.</blockquote>
What these considerations matter if the buyer brings 50%+ down to the purchase?</blockquote>
ZERO! It only matters if someone is putting down 20-25% down and the appraisal lowers the loan amount.</blockquote>
It will have to be a super high down payment for it to work. Say the appraisal come in at $650 that is the max the lender will lend the buyer will have to make up the difference in cash of another 130k and on top of that is the 20% down on the $650 ($130K)first so a total of about 260,000 will be need at close of escrow plus closing costs which could add another 20k easy on top of that amount. So for this deal to work a minimum of 40 to 45% in cash of the high $780 k price would be needed. When i finish out a tract of homes and sell the models we would run into these problem of low appraisal value all the time. I warn the buyers upfront of the potential and most would buy anyhow since they are getting a new model home with all the whistles and bells. For this property any potential buyer that finds out the appraisal did not come in at value and to be told the need to make up the difference will probably tell these flippers to go pound sand and buy something else.
