Is Flopping Hurting the Housing Market?
I ran across this artcile this morning and it provides a lot of food for thought. On the surface, flopping appears to be a legimate way for an investor (and agent) to make some quick money. However, financialo regulators do not agree and have been looking into this practice for quite some time.
In it’s truest sense, flopping can be problematic. Not too long ago, I had an offer accpted on a home for $215,000. The listing read “not a short sale or foreclosure”. I certainly had no reason to believe otherwise but the nightmare began to unfold rather quickly. A land trust had an accepted offer on the home at $185,000 but had not yet closed. They were attampting to use “hard money” to facilitate a dual escrow. Unfortunately, I only found this out when we were ready to close escrow on the agreed upon date but were unable to as the approval letters from the lender were not in order.My buyer REALLY loved the home and I attempted to wait it out but, after a few weeks of listening to stall tactics, we decided to go in a different direction. The relly sad part of the whole ordeal was that the owner of the home was a realtor AND the father of a designated broker in our community. The broker even admitted to us that he had listed it for awhile but decided he didn’t want anyhting to do with the deal.
Another version of flopping has a takes on a whole different meaing for me. Due to the extremely high inventory of foreclosures in my community of Maricopa Arizona, it is nearly impossible to genrate an offer on a short sale. As a result, these short sales are staying on the market for hundreds of days and, in many cases, are unltimately being foreclosed on. Since agents, and their clients, are desperate for an offer, any offer, they will often accept one at well below market value. Though the odds of a lender accepting such an offer are low, it does happen and an investor is then able to “flop” the home after they close escrow. It appears that there is nothing wrong with this practive as the market has dictated the price. If the lender decides to “dump” the home for whatever reason, I don’t see why an investor cannot take advantage of it. It happens all the time in the large foreclosure auctions that are being held around the country.
This is definitely a controversial topic and I am sure that we have not heard the last of it.
