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In Defense of “House Flippers”

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construction_269015888“House flipper.”  What does the term mean to you?

Regarded as real estate entrepreneurs by some, dismissed as property profiteers by others, house flippers typically purchase homes at below market value, then sell (or flip) them quickly at a profit, usually in the midst of a market with prices on the rise.    Still, as long as they are conducted within the boundaries of ethics and transparency, house flips are a legal activity that actually perform a useful function in today’s inventory-starved real estate market.

Apart from how in-demand our real estate market has been over the past few years, the other big story is how this upward trend in sales has left our market seriously short of properties to sell—to the unending frustration of those now looking to buy.

To complicate matters, many of today’s home buyers demand instant gratification in the form of new construction—or want existing homes that require little repair or updating.   Still others have the romanticized notion of snagging an extraordinary deal on a foreclosed property—until they see the amount of work and expense that will be necessary to restore properties that have often been left vacant and unattended for extended periods of time.

Imagine a property devoid of every single enhancement that makes it livable.  The water and electricity have been shut off and all the major plumbing and bathroom fixtures, appliances, counter-tops—even the copper coils on the air conditioning units—have often been stripped away and carted off.   In the meantime the home has been unoccupied for months—perhaps years—without the regular care and maintenance that an attentive owner would insist on.  The lawn and landscaping are out of control; and if there is a swimming pool, it has long since slimed-over with algae, dirt and debris.   Moreover, there can be even more vexing problems that go unseen—including who has true title to the property—that must be solved to everyone’s satisfaction before it can be sold.

If this all sounds like more than you bargained for, be advised that some version of this scenario is what buyers often encounter when searching for distressed properties—especially now that the most desirable ones have been sold and their overall numbers are dwindling.

Enter the house flippers, who endeavor to restore these neglected properties with the goal of profiting from their resale.   Or indeed, the more traditional investors who are willing to tackle problems associated with distressed properties in order to eventually earn a regular rental income.    Either way, ethically-grounded investors and flippers perform a useful service in our under-inventoried market by providing homes to buy or rent that would otherwise have been unsightly drags on their neighborhoods.   Plus, their rehabbed versions are likely to command higher prices and add value to nearby properties.

Like any enterprise involving the exchange of high value assets for money, there has sometimes been unethical or criminal activity tied to the process of house flipping.  We believe that such breaches of trust should be prosecuted to the full extent of the law and regret that the actions of a few give a bad name to those house flippers who are willing to take on expensive, complicated and often risky remodeling projects that most of us would rather not.

A better balance between supply and demand will eventually return to the region’s housing market as equity continues to seep back into it.  But until it does, we commend the very useful role that housing investors and flippers have played in expediting our market’s return to normalcy.

In Defense of “House Flippers” was last modified: June 3rd, 2015 by Michael Saunders