The reality is that you can not. Let me be on record that I am 100% in your court. IN the 5 bay area counties where housing supply and demand is so out of balance, owner occupied purchases should get first priority over investors and flippers. Those buyers are just adding to the cost of housing in this area. I ahve written to the state on this many times but the process is slow and I am one lone voice in the woods. Bigger interests have more clout and importance up there.
Call your representative, tell a friend, then have them call their representatives.
In your example, if a true comp for the home in question is $135, it will not sell at $155 or $170. Remember there are lots of things that go into determining a home's value. Neighborhood, vews, age, kitchen and bath upgrades, lot size, view, number of homes on the market, and many more
Annie's answer is correct and helpful, but don't think of youself as "fighting flippers". They are doing nothing wrong...nothing that the great American free market system doesn't encourage and reward.
Remember it is "sold" prices that set the market, not "for sale" prices. Be sure the comps you're getting from your Realtor are based on 1) sold homes, 2) within 1 mile of the subject property, 3) sold in the last six months (or better 3 months), and 4) within 10% of the floor space. That's where appraisers start. Then it goes to condition, number of bedrooms/baths, garage, and more.
But don't be discouraged. Homes today are selling are near record lows, and mortgage rates are, too. I can not remember a more advantageous time to be a buyer (and I'm 67).
Good luck. Keep looking.
good luck and if you need any help call
Broker / Owner
Windermere Walnut Creek
You need to work on the terms of your offer.
Don't ask for much from the seller, don't ask for anything from the seller would be your best bet.
Offer to pay the county transfer tax.
Have title company be sellers choice.
Cut your inspection, loan and appraisal contingency dates to the shortest time frame you can.
Ask your agent to see if they can find out from the listing agent what kind of terms the seller prefers.
Work with an agent who is well known in your area. Agents like working with other agents they know and like.
Make a higher downpayment if possible.
Make a higher deposit if possible.
Talk with your agent to figure out how you can make some changes to your offer to make it the best! Good Luck:)
You are also protected with an appraisal contingency, and should discuss this contingency along with the loan and inspection contingencies set forth in the purchase contract with your agent. Or better yet, they should be discussing this with you. Be sure that your agent runs a proper CMA (Comparative Market Analysis) so you know what to set YOUR offer price at. YOU, the buyer, ultimately sets the price in this market, not the seller. Appraisers go off of sold prices along with other criteria in their search to get the right price for your home.
Best of luck.
The irony is that we also get blamed by many sellers for driving down the prices, and that's also not necessarily the case for all rehabbers. Again, all rehabbers don't buy properties with cash. Some of us (myself included) prefer to buy properties with creative financing, and we'll pay closer to retail (and certainly more than the cash buyers).
Liz12, believe it or not, many of us flippers prefer to work with buyers like you on various deals, and we're often willing to sell properties slightly below their current market values (after they're fixed up) to give our buyers some instant equity. (I often give my buyers with their own financing $10K to $20K instant equity in the properties that I sell. I know others who operate similarly.) This helps our buyers to qualify for their loans more easily, and it helps us to sell our properties faster.
Don't throw out all flippers with the dirty bathwater. Just because youâ€™ve encountered one that may not do business to your liking. In the end, â€œbadâ€ flippers are hurting only themselves. As for waiting for an all-cash offer, it wonâ€™t be an investor or â€œflipperâ€ buying it â€“ it would make no sense. Flippers buy distressed homes at the bottom of the market â€“ not renovated homes at the top of their price range.
In the end, if everything is as you say, then they will only be hurting themselves.
Just want to add a couple of comments here:
(1) The difference between what a flip costs an investor (purchase price plus upgrades) and what they make when they sell it (profit) is totally irrelevant to a buyer. Itâ€™s exactly the same when buying a new home from KB Homes, Pulte or some other builder. What their costs and profits are is strictly their own business. Itâ€™s also the same when buying a house from a normal seller: what they paid for the home a few years ago and how much they may have invested in upgrades over the years has absolutely NO relevance to market price today.
CURRENT MARKET PRICE FOR HOMES IN COMPARABLE CONDITION IS ALL THAT MATTERS.
If a flipper is trying to sell a flip at over market value, it wonâ€™t appraise and they will eventually have to come down or rent it out. The market itself does a VERY good job of â€œeducatingâ€ flippers.
(2) Not all flips sell at a profit. When a flipper buys a home on the courthouse steps, they are responsible for all repairs and existing obligations. That includes back HOA fees, delinquent taxes and any other liens of any kind. They have to deliver a clean title to the next buyer â€“ and assume all obligations. In addition, they often donâ€™t have a chance to thoroughly evaluate a property before they buy it. I know this from personal experience: once you get in and start working on a property, it often can cost WAY more than planned. This does not mean a flipper can add overruns to the price: the market sets the price, not the flipper. Many times a flipper has to eat a deficit. Itâ€™s all a part of the risk they take.
(3) Flippers are improving neighborhoods AND helping the economy. They are taking marginal houses and fixing them up â€“ they are raising the bar for the neighborhood. They are buying goods and hiring laborers. This is a VERY good thing for all concerned. It helps stabilize neighborhood values. It brings quality to distressed neighborhoods with new landscaping, paint, etc. Itâ€™s called urban renewal and itâ€™s VERY much needed in many areas of the bay area that have been devastated by REOs and short sales. In addition, they can upgrade a home cheaper than a homeowner can. Itâ€™s called â€œeconomies of scaleâ€ and they can buy windows, carpets, cabinets, paint, tile, granite, etc. based on volume discounts. And since many flippers use the exact same products from house to house, they donâ€™t incur design costs â€“ it all happens automatically. This means a buyer can buy an improved home done below their cost, move in and get on with life â€“ itâ€™s all done for them. And that is EXACTLY what many of my clients are looking for.
(4) As for banks not approving â€œflipsâ€ because of the ratio between the price paid and the new selling price, that is true in the case of FHA loans, and it is only for the first 90 days from the date of recording. Itâ€™s really a silly law because the FHA is not factoring in the cost of upgrades, therefore they do not end up with a â€œrealâ€ cost to the flipper. There are ways to structure a deal to work within these guidelines and get the transaction closed.
Put an offer on a Flipped Home in Antioch, went $3,000 over the asking price. We were told by the Seller's Agent that the previous 7 offers were rejected for being low ball offers. Knowing what the Seller paid and put into the home this would have left the Seller with a $35k profit. Seller ends up rejecting our offer completely without any kind of counter offer. Our Agent thinks they are holding out for a 'all cash offer', i.e. Investors/OTHER Flippers.
So Sorry to say, I am calling BS to the notion that Flippers are saving these neighborhoods. They could care less if they are selling at a higher profit or to families, As long as it's an ALL CASH DEAL. (what's the point of having financing lined up, mortgage rates being low and having good credit, if I need $170k in cash to buy a home.)
â€œowner occupied purchases should get first priority over investors and flippers.â€
Flippers are buying homes where normal buyers cannot â€“ on the court house steps. Itâ€™s impossible to provide priority to owner purchases there. They donâ€™t normally have the means.
â€œThose buyers are just adding to the cost of housing in this area.â€
How so? If banks take the properties back, they will go on the market in distressed condition as REOs. Which means two things:
(1) Buyers have to fix up the homes themselves which, in many cases, is not possible. Many buyers on the bottom end of the market are stretching to get in, let alone fix it up after they have the keys.
(2) Many REOs do not qualify for FHA loans. This means that FHA buyers have access to fewer properties.
Whereas most banks will not improve REOs (exception â€“ Wachovia), flippers do â€“ in most cases, far beyond what most buyers could afford to do. And they are, in most cases, putting them back on the market at reasonable prices in ready-to-move-into condition. And, if they have seasoned 90 days (and most have), they readily qualify for FHA loans. Yes they are priced higher than REOs. BUT â€¦ they are in better condition. In fact, they are normally priced at par with other â€œnormalâ€ sales that are, in many cases, not as nice.
After viewing dozens of REOs and other distressed properties, buyers weâ€™ve put into flips have been absolutely delighted. Especially FHA buyers.
And the bottom line is this â€“ they still have to appraise. I talked to a flipper just yesterday who was painfully aware that he could not overcharge â€“ because he knew it wouldnâ€™t appraise.
(1) They are buying distressed properties on the courthouse steps at wholesale prices. These are homes that typically you would not be able to purchase.
(2) Many of these homes sat for a long time as vacant short sales, then were foreclosed by the banks. Lawns are dead, carpets are trashed, they need paint and many are damaged by vandals and neglect.
(3) Instead of the bank throwing the property back on the market as an REO, flippers here in the Bay Area go in and completely remodel the properties. In most cases you can expect new kitchen cabinets, granite counters, new flooring, paint, refurbished bathrooms, new windows, good roofs, new landscaping and more.
(4) In most cases, they also deal with Section 1 damage â€“ something that is not possible if the sale is an REO or short sale.
I love selling flips and have sold many of them in the past twelve months to VERY happy buyers. After seeing dozens of forlorn REOs and short sales, buyers welcome a flip that has been upgraded. And keep in mind that professional flippers understand market value and wonâ€™t be putting homes on the market at artificially high prices. The property has to appraise â€“ if it doesnâ€™t, it wonâ€™t sell. If you feel a property is overpriced, simply move on. It will probably be there a while, then have a realistic price reduction. Or it may go off the market and be rented.
FHA has also recognized the value of flips â€“ they removed many of the restrictions they used to have in place to make it easier for FHA buyers to obtain these homes.
Read the following post for more information:
HUD Provides Flipping Relief: 3 Significant Buyer Benefits
There is no need to fight flips. They are actually helping restore the bay area economy â€“ ESPECIALLY in places like Antioch where record numbers of foreclosures devastated the housing market and caused untold numbers of homeowners to lose all their equity.
We have a number of flips in escrow right now â€¦ and the buyers canâ€™t wait to close escrow and move in to the wonderfully rehabbed homes.
If you found out that it sold for $5,000 more than you offered, would you say:
"If someone was willing to pay that much, let them have it", or would you say
"If I'd known that I would have offered $5,000 more".
Are you making your highest and best offer? Or are trying to buy something for as low a price as possible?
The thing that should matter most to you is the value the property offers to you and your family now and for the next 3-5 years. Sometimes all the comps in the world can't measure the value as it may pertain to your needs.
Also, please don't be afraid to submit an offer even when you are way below the asking price of a property. If you don't, you have ZERO chance of getting that home.
Be persistant, be prepared, be realistic and it will pay off.
If I were you, and your comps indicate that the current market value of that property is $135K, then offer $135K for it.
Also, keep in mind that you (as a retail buyer) typically will beat serious investors bidding on houses, because you're willing to pay more. So please stop falsely accusing us, and place the blame where it belongs: on other retail buyers (like you) who are willing to pay more.
You should continue writing offers at the price you feel comfortable with. If people want to pay over market value, that's their decision. However, if you really love something, it probably wont hurt to offer a little bit more. In the end, you should be happy and satisfied with your purchase.
The best you can do is continue writing offers and waiting.
In the time the over priced home will come down.
Also be persistent. Do continue to improve your financial picture by saving more etc.
A bigger down payment, shorter contingency period, also helps.
Of course a flipper who comes in with all cash and outbids you, then clearly it indicates the market is moving up, if after he buys it, fixes it and sells for his / her ask price.
We are in a good spot with our down payment and fiancing, but the home that we put an offer now has multiple offer. So if this falls through, then it's back to looking. Which will leave us looking through properties the flippers have not wanted, (no profit margin for the flipper, small lots or already on the market for the top price in the neighborhood) or properties that have been flipped and are now over-priced for the neighborhood. (meaning they will appraise for less than what our offer would be).
Thanks for all the info and advice!
1- Did your agent do a good job when he or she pulled the comparables and get to the $135000 ?
2- Were these sold properties (the comparables) in such a bad shape that they sold very cheap, and did the flipper buy that house, fixed it up, and is trying to resell for a true value?
3- Although it is true that by fixing the house he may have gone overboard, and over improved it, and it may not appraise for the $170k he is asking, but he still has the right to dream, and price it at any price he wishes, but that does not mean it will sell for that price
4- Now, if you are really stuck on buying that house, it must be because it is nice enough. Maybe you should have a look at what the comparables were, and make an assesment and an offer on what you really think.
5- Just as he has the right to list it for $170,000, you have the right to offer what you think is right. So what is stopping you from sending him an offer? Are you going to send in a good offer? Are you pre-qualified? and if you are, are you buying with enough down payment? are you buying cash?
The first thing is that you need to be prepared to move quickly. You've probably already been pre-approved, so you'll be ready at a moments notice to get your offer in first.
There will likely be some homeowners who would prefer to sell their house to someone who'll be living in it rather than to a flipper. Have a personal letter to the sellers ready to accompany your offer. It may get their attention and a quick response.
Good luck! Annie