[quote=pemeliza]”The last on Felton was a courthouse steps property, I believe. If he/she/they actually sell for over 200k profit, I don’t consider that a slim profit margin and it is manipulating the appraisal comps for future properties.”
I think I see your frustration now JP. For whatever reason buyers so desperately want a “turnkey” property that they will pay way over what you think is reasonable because you know as well as anyone else who has ever done any remodel work knows what the 2k granite countertops and 2k GE stainless appliance packages are actually worth. Thus you are pricing in say a 20k-30k premium above wholesale price given the cost of the “upgrades” and are stunned to see the houses sell for 150-200k over that instead. I think what you might be overlooking is that apparently there is a huge market in these older areas for “turnkey” products and thus they tend to a sell at a premium above and beyond the wholesale value of the upgrades. In other words, the whole is greater than the sum of the parts. People are basically paying for convenience.[/quote]
BINGO!
[quote=pemeliza]
I think the solution is to simply ignore flipper properties and focus on finding a motivated seller with a great location and great bones. If my theory is correct you will not need to compete with buyers looking for “turnkey” properties and thus you should be able to score the kind of deal you are looking for. As a qualified buyer you are in charge of how much you offer and pay. If they seller wants to sell and you are they only game in town they have to come to you. Of course, you will have to pay more than the flipper that is buying on the steps because you are not paying cash. However, I think that there is a reasonable “middle ground” and you can probably find plenty of deals that while not the steals the flippers are getting will suit you well and further I think if you look hard enough you can score a deal 30-50% under peak pricing if you keep at it and don’t get frustrated seeing what the “cash” buyers are paying.
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It’s hard to ignore the flippers when they are your competition. There have been a number of “open market” sales where we were waiting for the price to fall, but a flipper swooped in and overpaid (for what it was) only to sell to some clueless idiot who was willing to pay $150K for a $20K “upgrade.” Sorry, but it’s extremely frustrating. I think jpinpb and I are looking for the same types of properties — older homes in established neighborhoods — and flippers are all over these properties if they are not already upgraded…and YES, they are willing to pay more than organic buyers because they know that fools are out there who will pay the $150K-$200K premium for a $20K-$30K upgrade package. This IS our competition.
[quote=pemeliza]
In a way, the flippers are actually helping you and CAR because they are essentially eliminating a lot of your buyer competition by feeding the need of the “turnkey” buyer. If there were no flippers to fill this need, then everyone would have to buy a fixer and you would be competing with a lot more buyers to get that jewel in the bluff.[/quote]
No, the other organic buyers are our competition no matter what. The difference is that the buyers who purchase overpriced flips have to finance the upgrades while we (not sure about jp) are not financing the upgrates (we would pay cash for everything). Flippers enable these buyers to finance the upgrades (with a hefty premium because they can be financed!) instead of having to pay for the upgrades out of pocket. This absolutely increases prices. This is the difference between a market without flippers and a market with flippers. They **absolutely do** affect prices.
Again, in and INVENTORY CONSTRAINED market, any additional demand will affect prices. Flippers represent additional demand, and they are affecting the comps for those of us who do not want to pay for their “upgrades.”
