House Flipping a Dying Art

by john on September 10, 2006

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Anyone who was a high tech investor in the late 90s surely recalls seeing comparisons between the stock market at the time and the Tulip Craze of the Sixteenth Century. Everyone knew prices were too high but as long as another sucker would show up to buy for more than you paid it really didn’t matter what you paid – there were profits to be had! In the end the last suckers were left holding the bag.

Jason points to a web site that documents in vivid detail that we’ve reached that point in the housing market, it least in the market documented by the site.

Check out the last sale date of these houses or, in the case of the house here, the last two sale dates. Clearly these flippers didn’t care what they paid for a house because they knew they could sell it to someone else at a profit. Maybe no more.

Million Dollar Listing, Flip This House, Flip That House are all new shows prominently feature flipping. They haven’t been on long but nonetheless they’ve Jumped The Shark and signaled the end of the big time flippers.

While I don’t live in a market like that one I do have some experience with how housing prices can get so out of whack. When I last refinanced to consolidate some basement finishing expenses and an adjustable rate second I was shocked at what I saw in my appraisal. First, it should come at no surprise that my appraisal came in at exactly what I needed to avoid paying PMI (80% loan to value). What was astonishing is that the comparables using in the appraisal were not actual recent sales but actual recent appraisals. The whole point of using comparables in an appraisal is to show that “hey someone else bought a recent house for this, so this must be what your house is worth too” – which is actually a pretty reasonable assumption when it is based on actual sales. But who knows for how long they have been allowing appraisals to be based on other appraisals only?

What a house of cards. Buckle up. If you own a house you need to sell, sell it now for whatever it takes. And if you own a house hope you don’t have to move.


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