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Thursday, 2 Jun 2016 | 9:26 AM ET

It looks so easy on TV. Buy a bargain-basement house, pull up some nasty carpet, re-tile the bathroom, paint away the wall stains and sell it for a hefty profit.

It’s not, however, all those popular shows that are driving the flipping market today. It’s pure and simple prices — and profit. There is a severe lack of good quality, turn-key homes for sale, and that has created a seller’s market across the nation, even for those reselling homes.

After cooling off in 2014, home flipping is on the rise again — its share of all home sales is up 20 percent in the first three months of this year from the previous quarter and up 3 percent from the same period a year ago, according to a new report from RealtyTrac, which defines a flip as a property bought and resold within a 12-month period.

While flipping today is nothing like it was during the housing boom a decade ago, when investors used risky mortgages, it is reaching new peaks in 7 percent of the nation’s metro markets, including Baltimore, Buffalo, New Orleans, San Diego and even pricey Seattle.

Dana Rice, real estate agent and home flipper, at her latest project in Bethesda, Maryland, a very small colonial, within walking distance to shops and Metro.

Diana Olick | CNBC
Dana Rice, real estate agent and home flipper, at her latest project in Bethesda, Maryland, a very small colonial, within walking distance to shops and Metro.

“While responsible home flipping is helpful for a housing market, excessive and irresponsible flipping activity can contribute to a home price pressure cooker that overheats a housing market, and we are starting to see evidence of that pressure cooker environment in a handful of markets,” said Daren Blomquist, senior vice president at RealtyTrac.

That’s because flippers today largely use cash — 71 percent did in the first quarter of this year. Compare that to just 27 percent who used cash at the height of the housing boom. That helps keep most flippers conservative, but it also exacerbates the problems for entry-level homebuyers, who are facing one of the tightest housing markets in history. They simply can’t compete against all-cash buyers.

Usually flippers look for distressed properties either in the foreclosure process or already bank-owned. These are not always listed on public sale sites. There are fewer of those today, so flippers are moving to the mainstream market, creating that new pressure.

“A telltale sign is when flippers are acquiring properties at or close to full market value. Those markets are so competitive that even the off-market properties flippers are looking to buy are not selling at much of a discount — and there may be very few distressed properties available,” said Blomquist.

Examples of these markets include San Antonio, where Blomquist says flippers are actually purchasing at a 7.8 percent premium above estimated full market value, as well as Austin, Texas; Salt Lake City; Naples, Florida; Dallas and San Jose, California.

Despite the premium to buy, flippers are still seeing growing gains in profit. Home flippers realized an average gross profit of more than $58,000 in the first quarter of this year, the highest since the third quarter of 2005, according to RealtyTrac.

Real estate agent Dana Rice and her husband flip houses in the tony D.C. suburb of Bethesda, Maryland. Prices there are well above the national median, and there are few distressed properties. Instead, they target old, small fixer-uppers. Even those command a hefty purchase price up front, but they can also offer big rewards.

“I didn’t want a teardown. There is so much character in this part of Bethesda,” said Rice. “I don’t think that everybody wants a brand new build. There is a hole in the market because not everyone wants to do a renovation. If you put a little bit of effort in, these numbers can be huge.”

Rice purchased her latest project, a very small colonial, within walking distance to shops and Metro, for $680,000. She expects to put half a million dollars into the renovation, adding both square footage and high-end finishings; she is confident that in this competitive market she will see an 18-25 percent return on investment.

“It’s like birthing a baby. … If you’re overpriced, you’re dead in the water.” -Dana Rice, real estate agent and home flipper

“It’s like birthing a baby,” she said, noting that she will wait to list it until she feels the market is just right. “If you’re overpriced, you’re dead in the water.”

The lack of inventory is certainly a double-edged sword for flippers. Their initial investment price can be high, and flippers are often competing against local builders, who may want to tear the house down and put something up that is twice the size. On the other hand, not everyone wants or can afford a huge, new, expensive home, and that gives flippers the edge.

“The key here is that there is particularly a dearth of listed inventory in good condition,” said Blomquist. “That is the inventory flippers are competing against when they sell.”

Nothing can kill a sale faster than a dated, closed-in kitchen area. Many of today’s buyers see the kitchen as the home’s command center, and not just a place for cooking and eating. They want the kitchen to be many things at once, hence the rise in popularity of what is known as the multifunctional open-concept kitchen.

Read more: 9 Modest Fixes for the Problem Kitchen

If your clients are looking to renovate an existing kitchen, or you need to advise them on building one that’s brand-new, the Washington Post shared some background on how they can design a kitchen space so that it’s functional in many different way.

“Whether you are renovating existing structure or building new, architects fully recognize the need for space that is designed for movement and flow,” says Stephanie Brick, senior designer at Sustainable Design Group, in Gaithersburg, Md. “There are still rules and important elemental guidelines — you do not want to just delete all of the walls on your first floor. But by being selective in the design, materials and professionals you work with, you can easily achieve a space that does not merely react to, but anticipates, your bustling lifestyle.”

The two main considerations when designing a multifunctional space are wall placement and storage. While it may seem like an easy solution to knock down walls, Brick says there are other architectural solutions, like open doorways, that can give a similar effect while keeping the space architecturally interesting.

Being as honest as possible about individual organizational and storage needs is key when creating a multifunctional kitchen. For some owners who want to use the kitchen as a makeshift homework area or as a place to handle their bills, adding storage for these needs will be necessary. If your clients do a lot of cooking and entertaining for large groups, they will want to make sure the kitchen has space and storage to accommodate that process. If the family has small children, the kitchen can be designed with their safety in mind.

Brick has one final piece of advice when designing this type of kitchen space. “Honesty with your architect is key to creating a strong working relationship and delivering an equally beautiful and functional space in your home.”

Source: “How to create a live/work/play space at home,” The Washington Post (June 8, 2016)

via Now Trending: The Multifunctional Kitchen | Realtor Magazine


By: Michael Thompson

As an active investor I have had numerous people tell me horror stories about how they were “duped” by a builder and/or developer.  As a realtor, I take pride on not being “duped” because when I am so called “duped”, then so is my client, or are they?

I took a client to various builders in Cape Coral, FL.  As it was a busy market, a lot of builders flocked to this area to capitalize on the boom.  This brings the quality of builder reputation down, as more builders who come in are just looking to build as many “specs” as possible and make as much money as they can in a short time frame, happens in the real estate industry as well.  So I thought the builder I took this client to was, well known reputable, state-wide builder based out of N.W. Florida.

My client signs a contract to have a home built. We provided the lender letterhead stating the buyer was in fact in good standing for obtaining a loan.  A year and half later, they call me up and ask for another letter from the lender stating the buyer was still qualified to purchase this home because they have had numerous cancellations, I contacted the client and got the letter and provided that to the builder as requested.  The home is still not built, the market has crashed something awful and my client wants to back out about 2 months later as he was locked in to a contract to purchase a home that isn’t no where near his contracts price in today’s market, he was fine with losing his $1,000 deposit.  He wants to back out, look at other homes and when he stopped by the builders model center to cancel his contract, the builders sales agent says oh ok, no problem in fact we have the same model home you were building currently available and vacant, although in a different area, it’s $50,000 cheaper! So the buyer…that I brought to this builder, cancels his old contract, signs a new one on the spot to purchase the same house $50,000 cheaper and the builder, tells me since I wasn’t there when the new contract was signed, they are not goin to pay me a real estate commission.  We’re talking about $9,000 and a year and half into this file.

Many builders are having financial troubles these days, especially the ones who worked heavily with investors at some point in their company’s existence.  Some builders will offer realtors incentives for bringing buyers to their model centers.  Some builders are in it for the money and could potentially be directing their sales forces to be more aggressive in working with realtors.  Although I was the pro-curing cause of this transaction, by initially introduce these two parties that are directly involved in this transaction, was it legal for them to not compensate me because I wasn’t present at the time the 2nd contract was signed?