Return of the flippers

Palm Coast Observer
Opinion

Investors who entered the real estate market during the early stages of the last decade’s bubble did well. It was mostly the “me too” followers that were stung. The early arrivers of the next cycle are making their move. They see the market at its bottom. I believe they are right.

For most homes sold even six months ago, the most recent prior sale was typically five to seven years ago, during the peak of the bubble. Over 50% of transactions involved a lender-owned property (via foreclosure or a deed in lieu) or an underwater owner forced into a short sale. No one was confident that they could sell anything into such a depressed market. Investors were active, but they were primarily buying properties to use as single-family rentals. Flippers were absent from the scene.

Things have changed. The inventory of single-family Flagler County homes listed in the Multiple Listing Service has dropped below 800 homes. There are well over 600 homes under a sales contract. Astute investors sensed the tide was turning and began quietly entering the market. They’ve been sorting over distresses properties at foreclosure auctions, lender-owned sales and short sales trying to find homes with upside potential. Some need only a sprucing up. Others have suffered from vandalism and neglect and need remedial work to make them saleable. But if the price is right, investors make a move.

Glenn Fairchild finds his prizes at foreclosure auctions. Since September 2010, he has purchased nine properties at the clerk of courts office. In a typical transaction, Fairchild purchased 126 Beacon Mill Lane Oct. 12, 2011, for $82,876. He sold the same property for $124,000 March 6, 2012. According to public records, Fairchild has sold eight properties in a similar pattern during the past year.

Alexander Gourin also frequents the clerk’s office for bargains. He picked up 29 Primrose Lane Sept. 13, 2011, for $86,600. He sold it for $127,000 March 30, 2012. Alexander sold eight properties in 12 months.

KACS Acquisitions LLC prefers to find its treasures among lender-owned listings. The company has sold five such properties during the past year. In a typical transaction, KACS bought 103 Laramie Drive from Suntrust Bank for $73,700 last November. They sold it in April for $123,700. This was one of five similar transactions during the past 12 months.

I’ve found at least a dozen such repeat buyer/sellers. Clearly, there is gold in them there hills, but the gain is not pure profit. There are transactions costs; doc stamps, selling commissions and possible legal expenses to clear title. Fix-up and carrying costs can take a bite out of profits, too. And there is risk. Consult an attorney before entering this arena.