March 31 (Bloomberg) — During the U.S. housing boom, even amateur investors could buy and sell a property within a couple of months and turn a profit. Today there’s nothing amateur about house flipping.
Homes with punctured walls and missing appliances draw multiple offers from professional investors at auctions in foreclosure-ridden states such as Arizona, California, Florida and Nevada. Competition is so stiff that experienced flippers such as Sergio Rodriguez and Brian Bogenn look back with nostalgia at last year, when they turned over 48 residences in the Phoenix area.
“A year ago, bums outnumbered bidders at the courthouse steps,” where many foreclosure auctions take place, Rodriguez said. “Now the bums are way outnumbered.”
In Phoenix, 4,661 foreclosed homes changed hands within six months of being purchased in 2009, an increase of 81 percent from the year earlier, according to RealtyTrac Inc., which sells foreclosure data. Flips in the California counties of Riverside and San Bernardino rose 45 percent to 17,203. In Las Vegas, which has the highest foreclosure rate in the country, they climbed 38 percent to 8,042. Nationally, flipped homes gained 19 percent to 197,784 in 2009. Final figures may rise because some homes bought in the fourth quarter may get flipped this year, said Daren Blomquist, a spokesman at Irvine, California-based RealtyTrac.
FHA Waiver
Sales could get a lift from the Federal Housing Authority’s one-year waiver of anti-flipping rules that took effect Feb. 1, allowing FHA borrowers to acquire foreclosed homes from owners who have held title for less than 90 days. That gives first-time buyers a shot at investor-renovated homes, said Vicki Bott, a deputy assistant secretary at the Department of Housing and Urban Development in Washington.
The change also may help clear properties from markets such as Phoenix, where one in 124 homes in the metropolitan area received a foreclosure notice in February, the ninth-highest rate in the nation, according to RealtyTrac. Real estate values usually fall in neighborhoods littered with vacant homes.
The steps in front of the Maricopa County courthouse in downtown Phoenix are crowded most afternoons as dozens of people wearing sunglasses and ear buds plugged into their cell phones gather around auctioneers. The bidders speak in hushed voices by phone to the investors they represent — both flippers and those who plan to rent out the properties — as they work out their “number,” or maximum offer.
High-Stakes Poker
“It’s like a high-stakes poker game out here,” said Frank Gerola, 34, who represents buyers for PostedProperties.com, one of many companies that have sprouted up in Phoenix to serve flippers. “They want to know what you’re bidding on. You’ll have one guy bidding and another guy around him seeing if he can peek at his number,” said Gerola, who competes against representatives of companies such InvestAZHouses.com and TopPriorityInvestments.com.
Some investors try to cheat. Hours before the foreclosure auction for 7848 East Pampa Avenue in Mesa, Arizona, visitors were greeted with a handwritten sign pasted to the inside of the front window: “OCCUPIED. NO TRESPASSING,” read the note on the 12-year- old beige stucco house. “Needs carpet, paint. Tile is cracked.” It also warned of missing appliances and fissures in the pool and foundation.
New Paint, Carpet
It was a ruse, said Rodriguez and Bogenn, who checked out the house on March 18, the day after their $181,200 offer beat out a handful of bidders. An investor probably was trying to ward off competitors, Bogenn said. The house, which was vacant for months, only needed new paint, carpet, fixtures and a pool cleaning, they said. They planned to put it on the market this week for about $230,000.
Rodriguez, 31, and Bogenn, 47, didn’t see the house before making an offer. Like many investors, they subscribe to a service that checks titles and sends drivers to properties before the auction to relay photos and descriptions by mobile phone.
As the median existing price of U.S. homes climbed an average of 8.1 percent a year from 2000 to 2005, amateurs by the thousands jumped into flipping. Buying and selling homes with the aim of a quick profit was such an American obsession that it spawned two cable-television series — “Flip This House” on A&E and “Flip That House” on TLC — that debuted in 2005 as the market peaked. An excerpt from an article By Prashant Gopal.
If you would like assistance on upcoming auction properties or area foreclsoures feel free to give me a call or send me an email. Steve Kuncho 928-234-9560 stevekuncho@bhcrei.com
