Flip Off the Flippers

Dear Readers:
My apologies to those who have already read, and remember, this previous article on the repugnant practice of "flipping" properties-but I think the subject is so important it bears repeating. Unfortunately, the fleecing of elderly and unsuspecting homeowners continues unabated.

Dear Pat,
I'm worried about my elderly neighbor who is moving into a nursing home. He doesn't have any family in town and some of his close neighbors have been looking out for him these past years. Here's the problem--an agent who he called to help sell his house has offered to take it off his hands by paying him a lump sum of cash. The amount is far less than other houses have been selling for on this block. We all want to protect him. What do you advise?
---Concerned Neighbor

Dear Neighbor,
Unfortunately this scene is becoming all too familiar. Twice this past year I was called in to give second opinions to homeowners who were offered cash for their properties by would-be listing agents. In both cases the houses were worth substantially more than the cash offered. With a relatively small investment in decorating and repairs, the homeowners were able to sell their homes using the normal MLS process; each netted over $60,000 more than the cash offers would have given them!

Your neighbor is likely being offered a cash deal by a "flipper," an investor who intends to make a fast buck by selling immediately at a much higher price. The practice of "flipping" is not illegal in itself--it's simply exercising the freedom to buy low and sell high--but who wants to picture some scoundrel congratulating himself on the great deal he made at the expense of an old man's nest egg? The infamous flipping cases we've all read about in the papers involve the illegal practices of fraudulent appraisals and lending, where buyers are ruined by a mortgage far exceeding the real worth of their property--the darkest side of flipping. But let's take a closer look at the legal version, where the real gouging happens to the seller.

Who are these "flippers," and how do they differ from other investors? For one thing, the investor who is buying property for the long haul doesn't need to make a killing on the purchase price--he knows the property will appreciate over time, and he buys with the intention of paying the mortgage from rental income. A flipper is looking
for profit immediately, thus he must pay the seller less than the property is actually worth, in order to avoid the much harder task of finding     a buyer willing to pay more than the house is worth. Flippers can be individuals with contacts to the elderly; they can be high-profile franchises with big billboard ads; they can be--and this dismays me the most--licensed Realtors who ignore the spirit of their own Code of Ethics.

My advice to you, good Neighbor, is to step in immediately, contact a Realtor you trust, or several. Get one or more legitimate market opinions, and show the door to any agent or individual who offers cash to "take the problem off your hands." Remember, if your neighbor's house is in poor shape, he can still sell "as-is" to the whole market through MLS. He'll get a better result than any pre-market cash offer from an investor. To preserve even more of his savings a savvy agent can help him through the process of decorating and minor repairs, and he can sell at full market price. It seems that we're going through a time when the Wall Street shark mentality has moved to Main Street, and we must take extra care to look out for each other and ourselves. Don't let the bad guys win this time.