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What is house flipping

Updated on April 21, 2011

Beach House

Property flipping a growing trend.
Property flipping a growing trend. | Source

What is Property Flipping?

Flipping homes is a growing trend.  The technique is to find a home that is priced low, buy it, renovate it, and then sell the home at a higher price.  Homes may be priced low for various reasons such as divorce, death, foreclosure, or the owner lost their job.

There are two common ways to flip property:

  • Buy a house and resell it at a profit without occupying the property.
  • Buy a house, renovate it, and then resell it at a profit.  This is also know as fix and flip.

Be weary of fraudulent investors.

Although there are many honest investors engaged in this kind of business, those that are just starting out should watch out for fraudulent investors. 

How do investors search for property?

  • Some establish a rapport with the Real Estate Agents who will clue them in on distressed homes.  
  • Investors will also search listings looking for keywords such as "needs work" or "vacant."
  • Foreclosed homes are targeted.  The Department of Housing and Urban Developments website provides links to listings of foreclosed properties.
  • Serious flippers go to the extent of direct mail campaigns or place advertisements in local papers or on billboards.

Understanding the market is vital.  A lot of money can be made if the job is done right.  Some say that the best flippers are those that can line up buyers before they even purchase the property. 

We Buy Ugly Homes

Foreclosure Flipping
Foreclosure Flipping | Source

We Buy Ugly Houses

You have seen the signs, "We buy ugly houses."  Real Estate investors target "ugly" or "run-down" homes because they can profit from this type of property.  Most of these homes are in major need of repair some of them may have foundation problems, termite infestation, and some of them are in area's of major flooding.  Most of the owners are wanting to rid themselves of the property fast because they have missed several mortgage payments.  The investor will make what is called a short sale and pay them cash on the spot.

What is a short sale?

A short sale is where the lender will accept payment for the mortgage but in a lesser amount.  This way the owner is able to sale the home at a lower price and pay off the loan amount.  These type of sales occur when the home is just about to be foreclosed on.

Companies engaged in flipping foreclosures do the renovation works and the reselling.  Most of them buy ugly homes in any kind of condition because the lenders are not too keen on the idea of approving the loan on a distressed property.

Sellers should consider the installment term option and consult a lawyer.

This option can give them an even higher priced purchase offer and therefore, more money.  This option allows the owner to get a portion of the payment from the investor and the remainder on a staggered balance from 6 - 12 months.

So, if you have an "ugly rundown home" and you do not think it is worthy of repairing you can no longer afford to pay, you may want to consider those companies who "buy ugly homes."  It is best to think deeply about all your options and consult a Real Estate Lawyer to guide you in your decision.


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