Investors Who Buy Homes in Bankruptcy for Flipping Return

by Simon Lindsay on Bankruptcy

Flipping residential properties; where investors buy homes in bankruptcy and from foreclosure auctions, renovate them and sell them for a profit; has made a comeback in California. According to state reports, profits from home flipping are even bigger than those earned by speculators during the strongest years of the residential market.

Housing data showed that a big number of San Diego foreclosures for sale and other distressed properties in various areas of California have been sold to third party buyers involved in the property flipping venture. In Sonoma County, realtors estimate that about one property out of every 10 auctioned houses was purchased by a third party buyer involved in house flipping.

They also reported that from January 2008 to October 2010, 700 of the properties out of more than 6,400 sold in Sonoma went to third party buyers, with the rest getting seized by mortgage lenders. Market observers have reported that those involved in flipping bank foreclosures in California earn profits that are often more than double the worth of the investment.

One investor reportedly bought a foreclosed dwelling in Santa Rosa for an auction price of over $153,000 and ended up selling it for around $330,000 after a month. The deal resulted in a 115% gain for the investor, something that is quite common among those who buy homes in bankruptcy and foreclosures and flip them, reports revealed. On average, investors reportedly pay $236,000 for auctioned foreclosed properties and then sell them for $330,000 which gives them a 40% return.

Although flipping properties from bank foreclosure homes list has become a lucrative venture for most investors, a lot of homeowners who lost their properties to foreclosures have spoken against such investors, stating that house flippers are unethical. According to these homeowners, they are also often misled by lenders that they will be getting a loan modification, but they later find out that their houses have been sold to these home flippers.

Foreclosed homeowners have asserted that banks are being influenced by home-flipping investors who buy homes in bankruptcy and foreclosures to speed up the processing so that they can get their hands on the properties. Investors have denied the accusations and stated that home flipping will actually help the market recover in the long run.

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