New trend in house flipping
Sue McGill stands on top of the Carson City Court House steps with a clip board in one hand and cell phone in the other while about a dozen people wait for her to start the bidding on a bank-owned home in Carson City.
McGill, who works as an independent crier for banks and title companies in the region, has been auctioning homes for five years, and so far this year the work load isn’t getting any lighter, she said. In fact, it’s picking up pace.
“It’s pretty much everywhere that is really busy,” McGill said.
House flipping it seems, the practice of buying a home and quickly selling it for a profit, is making a comeback both locally and nationwide, say investors and firms that track the housing market. But it’s not the house flipping of five years ago, which spawned reality television shows and hordes of amateur investors looking to make a quick profit.
“This flipping is different than before,” said Todd Pigott, a representative with Zinc Financial LLC., a Clovis, Calif., based lender for rehabilitating houses “This is buying, improving and selling and that’s the big difference.”
Foreclosure auction activity is up by 200 percent in Carson City from February to March, according to RealtyTrac, a foreclosure tracking firm based in Irvine, Calif. Foreclosure auctions nationwide increased by 12 percent in the first quarter this year compared to the previous quarter, and is up 21 percent from the first quarter in 2009.
Pigott said the sudden increase in turning around homes started after the Federal Housing Authority issued a one year waiver on Feb. 1 that lifted restrictions against FHA borrowers from purchasing and then selling a home less than 90 days later.
The idea is to get more homes in default out of the housing inventory to relieve some of the downward pressure on the housing market, Pigott said.
But potential investors should be wary of many homes up for auction that could require extensive repairs or may have complicated financial obligations that the average investor may not notice until it’s too late, he said.
“The days of flipping I think are over,” Pigott said. “What is very active is buying a distressed property, rehabbing it and reselling it. That’s good for the economy.”
Dan Reyes, a former teacher who has been purchasing homes on the Carson City Court House steps for 10 years, said he’s noticed a increase in interest in the auction market.
“There was a long time when nobody was showing up,” Reyes said. “Now the banks are getting so inundated with properties they’re willing to discount some of them.”
Reyes said he’s learned many lessons over his years of buying homes and reselling them. He adds it’s imperative that investors do their homework before buying.
When checking out a home he purchased last year, Reyes said he discovered the previous tenants had ripped out all of the wiring before leaving.
“It was disheartening,” he said.
Jack and Paula Flower have purchased 15 homes in Carson City, Virginia City, Reno and Minden at auctions.
“The key thing is you have to know what’s owed on a house and in what order,” Flower said, adding “You have to know what you’re buying.”
When the Flowers visited their most recent purchase in Carson City, which they are now planning on living in instead of selling, they were greeted by a renter still residing there.
The renter knew the Flowers were coming – the landlord who had defaulted on the mortgage had been notified that the house was up for auction. Flower said the woman is now looking for a new place to live.
“It’s a decent living,” Flower said. “It’s getting tough, more competition.