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Si1

Could Market Be Pushed Down By Flippers?

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Just noticed on a local Rightmove for-sale search - some properties, run down, good sizes and very competitive prices for the area.

Not noticed this before, honestly surprisingly cheap, and a fair few of them. But they were all run down, almost detached from other prices for similar sized properties.

Could (stab in the dark) people flipping them (buying them as distressed auction sales) be gambling and throwing them into the general property market to make a fast buck - ie if they got them even cheaper at auction? Or could they just be repos being sold off via normal sales to get a better price (but still cheap)??

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Flippers cant push a market down, only up

Or else a flipper would loose money on each flip and very soon run out of it , then they cant flip anymore

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Could Market Be Pushed Down By Flippers?

And ruin his reputation for saving us all from a watery grave?

flipper.jpg

My money is on the sharks!

staff.jpg

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Flippers cant push a market down, only up

Or else a flipper would loose money on each flip and very soon run out of it , then they cant flip anymore

You just explained why your first staement is wrong.

Flippers are speculators. In good times they are fooled into thinking they are actually good at property trading. When HPI turns negative they still believe in their amazing powers of trading. Each losing flip merely convinces them they need to try harder, but they only become more desperate. The mistake they are making is going long in a bear market. Since they have no experience and little scope for shorting property, they are more or less doomed to lose all the flipping profits they made - and more, since transaction costs are hefty. The fact that their failed trades become part of the HPI stats merely serves to emphasis the stae of the market.

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You mean flipping from buying at auction and selling on the high street...

With the market in the state it's in (i.e. VIs not even talking it up by much) the outlook for keeping a property off the market for 6 to 8 weeks while it gets refurbished is not too rosy. Flipping of properties that "requires some work" normally entails doing the bare minimum to bring it close to the target market value. The sheeple then knock a few thousand off when buying through the EA and think they have a bargain. When prices are rising 1% per month, those 6 weeks and the gearing mean that there is quite a profit to be made over and above the value of the improvements and the fact that it was bought at auction. When prices stagnate, those 6 weeks spell a loss. If prices fall, then it's a disaster for the flippers.

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I think any auction flippers would be looking to minimise their EA fees by selling it themselves. If they've got half an ounce of sense about them (that might need 3-4 of them put together for awhile) then they will be listing them on "sell it yourself" sites that are hooked into rightmove.

Obviously the half an ounce of sense was missing when they made the decision/purchase if this is what's happening (maybe only 2 were together at one time/place)

Edited by ScaredEitherWay

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You mean flipping from buying at auction and selling on the high street...

yes

With the market in the state it's in (i.e. VIs not even talking it up by much) the outlook for keeping a property off the market for 6 to 8 weeks while it gets refurbished is not too rosy. Flipping of properties that "requires some work" normally entails doing the bare minimum to bring it close to the target market value. The sheeple then knock a few thousand off when buying through the EA and think they have a bargain. When prices are rising 1% per month, those 6 weeks and the gearing mean that there is quite a profit to be made over and above the value of the improvements and the fact that it was bought at auction. When prices stagnate, those 6 weeks spell a loss. If prices fall, then it's a disaster for the flippers.

well these properties look like un-modernised repos, so if they are flippers then your (very incisive, may I say) logic suggests not something likely to last in a flat or falling market.

interesting to see that poor condition properties starting to be a LOT not just a BIT cheaper than nicer ones in my area tho. Try postcode LS4 in rightmove. 3 bedders for sub 130k, outside the estate areas too, startling, if you know the area.

I thus feel my initial premise was wrong, except in so far as flippers may be sucking even more £s from the market in unnecesary fees and further removing structural support from house prices, but only an ickle and unappreciable bit.

Auction properties don't need to be resold thru agents for arbitrage to exist between auctions and the high street; that'll happen anyway.

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Do the mortgage lenders have an official line as to why they only (?) sell repossessions at auction? They're a VI, ofcourse, so it makes sense that they keep that side of things out of site of the sheeple. But do they have an official line on this?

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Guessing, but it looks here like a BTL is in the white slave trade now.

Selling people as well as houses.

http://www.rightmove.co.uk/viewdetails-166...=1&tr_t=buy

3-bed £60k

Nowhere in this town is THAT bad to justify that price. It's a "quick sale" job, although the yield would need to be known really. Maybe rent is £200/month or something stupid!

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I've always been amazed at how the lenders are after the best price possible at auction, yet to find these properties for sale is really quite hard.

And auctions seem to be during the week.

If it were me, I'd take out an advert in the property pages, like the EAs - stuff them in there just like everyday houses for sale - and hold the auctions at weekends.

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Repos dont JUST get sold on at auctions contrary to what some believe-they will often go through agents too depending on market conditions. Flippers rely on the rising market to make a buck so it's unlikely they'd try to chase the market down.

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I've always been amazed at how the lenders are after the best price possible at auction, yet to find these properties for sale is really quite hard.

And auctions seem to be during the week.

If it were me, I'd take out an advert in the property pages, like the EAs - stuff them in there just like everyday houses for sale - and hold the auctions at weekends.

they don't care (I worked for one in a ho for several years) - their contractual responsibility is to get a best price, but that's quite a loose term, and they don't want to hang around especially whilst also looking at legal proceedings against the repossessed party, and of course ALL the costs and losses are contractually borne by the repossessed mortgagee and added to the bill, so the lender itself wouldn't actually gain from getting more money from the sale, so why bother. Bankrupcies never seemed to have come in to it, and they also percieve an ongoing cost from having to hold property for any period; it just isn't their line of business.

Or put yourself in the shoes of the lending risk manager at the lending institution. 9-5 job, get paid for perceived results, always done like that anyway, no-ones going to thank you for actually trying to get the best deal for the repossessed borrower, your boss certainly doesn't care, and you want to go home early on friday; what do you do - I know, fire sale in a midweek auction. easy life.

as to what the official line is - I reckon it's mainly conservatism, that's the way it's always been done.

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Repos dont JUST get sold on at auctions contrary to what some believe-they will often go through agents too depending on market conditions. Flippers rely on the rising market to make a buck so it's unlikely they'd try to chase the market down.

this is interesting and informs my point re: WHY lenders choose auctions. Maybe they choose auctions when they have too many to sell efficiently via agents and/or if the market is falling so otherwise it would just stick for months or years...

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I think partly because of the current situation they know whats happening and if they tried to keep these properties to sell in open market they would soon have a shedload, all losing value . .!

Edit.. Their market is revenue and turnover, I think they call it churn, or they start to stagnate and bog down.

Edited by Loggy

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Si1

I've noticed this rise in run down properties too - I thnk rather than flippers it is the local developers getting rid of their stock that they were going to develop either because they don't see the future margins making it worthwhile OR (and I'm hoping here) that they are highly leveraged, can't sell existing developed properties so are having to sell undeveloped stock as they can't afford the repayments on it whilst it's sat there not earning money.

Lets hope that's right - go look at the new developments and they are not selling at all

Regards

SB

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Just noticed on a local Rightmove for-sale search - some properties, run down, good sizes and very competitive prices for the area.

Not noticed this before, honestly surprisingly cheap, and a fair few of them. But they were all run down, almost detached from other prices for similar sized properties.

Could (stab in the dark) people flipping them (buying them as distressed auction sales) be gambling and throwing them into the general property market to make a fast buck - ie if they got them even cheaper at auction? Or could they just be repos being sold off via normal sales to get a better price (but still cheap)??

Auctions have been selling very few properties in the last few months as people have been holding back to see which way the market is going, investors must be unsure about direction as well as 6 to 9 months ago there would have been very few unsold properties at auction.

The properties you mention could be property which someone has been holding onto for sometime and now realise it is time to off load as they may think the market is about to turn.

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Flippers are speculators. In good times they are fooled into thinking they are actually good at property trading. When HPI turns negative they still believe in their amazing powers of trading. Each losing flip merely convinces them they need to try harder, but they only become more desperate. The mistake they are making is going long in a bear market. Since they have no experience and little scope for shorting property, they are more or less doomed to lose all the flipping profits they made - and more, since transaction costs are hefty. The fact that their failed trades become part of the HPI stats merely serves to emphasis the stae of the market.

Check this out. very funny.

Flippernation

Can't wait for similar numpties in the UK to start howling when it all goes belly up :lol:

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Mmm sorry was at least 3/4 asleep when i first read and replied to this thread so sort of missed the point I think the OP was trying to make. It all depends on how many properties flippers are holding when the market starts to see a correction. I suppose in theory at least if they feel that the market is turning there may be a rush to get shot of what they have and to all intents and purposes if there is sufficient volume they do have the potential to push the market down further if enough try to pile in and offload at around the same time. Will be very interesting to see how things unfold that's for sure.

Edit: Nope still missed the point didnt I lol. Hard to say what's happening on the auction front really without some hard stats. You'd have to be a bit dim even by flipper standards to try and pick up bargains at auction and shift them in a downturn like we may see now-it'd be one hell of a gamble. As an anecdotal for you-my sis and ex needed to shift their house around a year ago due to divorce and although there was some interest at the time things werent moving fast enough. They put the house into auction and got bid up to within 2k of what they'd had it on the open market for so no discount element for it going at auction as far as the buyer was concerned. The purchaser was a BTL and then asked my sis if she wanted to rent back to which the reply was a definite 'thanks but no thanks' as she wanted a change of scenery and knew only too well how much work the prop wanted doing. She has rented a far better place for less than the chap wanted and he's left holding a prop which needs a LOT spending on it. He'd only had a basic mortgage survey so no real clue what he has let himself in for I dont think-if there is even a 'mild correction' he will lose BIG time on this prop a) because of it's condition and B) the area it is in-it's far from celubrious if you catch my drift ;)

Edited by stonethecrows

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Auctions have been selling very few properties in the last few months as people have been holding back to see which way the market is going, investors must be unsure about direction as well as 6 to 9 months ago there would have been very few unsold properties at auction.

The properties you mention could be property which someone has been holding onto for sometime and now realise it is time to off load as they may think the market is about to turn.

I think the clue is the phrase "Statutory Tenancy".

That'll be the old fashioned protected tenancy that existed before BTL.

Feg all rental income, no chance of jacking the rent up to market rates, and the tenants have the right to pass the tenancy on between generations.

The house is NOT cheap at that price.

This guy seemed able to turn a few quid out of that sort of tenancy, though -

http://archive.theargus.co.uk/1999/6/3/197583.html

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Do the mortgage lenders have an official line as to why they only (?) sell repossessions at auction? They're a VI, ofcourse, so it makes sense that they keep that side of things out of site of the sheeple. But do they have an official line on this?

Speed, mainly, I would think. They want to convert collateral into cash as quickly and as cheaply as possible, and to crystallise any losses so they know where they (and the defaulting borrower) stand. Their business is money, not property ownership, after all.

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I think the clue is the phrase "Statutory Tenancy".

That'll be the old fashioned protected tenancy that existed before BTL.

Feg all rental income, no chance of jacking the rent up to market rates, and the tenants have the right to pass the tenancy on between generations.

The house is NOT cheap at that price.

This guy seemed able to turn a few quid out of that sort of tenancy, though -

http://archive.theargus.co.uk/1999/6/3/197583.html

no, the houses I'm referring to don't appear to have statutory tennancies, although I grant that the one posted by someone else in Wales clearly did

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Speed, mainly, I would think. They want to convert collateral into cash as quickly and as cheaply as possible, and to crystallise any losses so they know where they (and the defaulting borrower) stand. Their business is money, not property ownership, after all.

Also, remember that the lender only needs to get his portion back. They don't care about any equity the mortagee has. If the house sells for below market value in an auction it isn't the lender who loses out. He gets his money back provided the selling price is above the outstanding debt. As far as they're concerned the mortgagee can get stuffed for his equity. I suspect many "sub-prime" loans still have plenty of equity as they're subprime because the mortgagees had to lie to move up the all important ladder of debt.... i mean homeownership

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Also, remember that the lender only needs to get his portion back. They don't care about any equity the mortagee has. If the house sells for below market value in an auction it isn't the lender who loses out. He gets his money back provided the selling price is above the outstanding debt. As far as they're concerned the mortgagee can get stuffed for his equity.

And even if the selling price is below the debt, the balance (plus ongoing interest and other costs) remains due to the lender, though whether it's collectable is another matter. Following the last HPC I remember people saying they'd handed the keys back expecting that would be the end of the matter; sadly for them, it often wasn't.

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And even if the selling price is below the debt, the balance (plus ongoing interest and other costs) remains due to the lender, though whether it's collectable is another matter. Following the last HPC I remember people saying they'd handed the keys back expecting that would be the end of the matter; sadly for them, it often wasn't.

indeed, I'm amazed how widely this is still perceived, even on these forums.

I believe this is another economic 'moral hazard' to be associated with the property bubble - the belief that if it goes wrong you can simply hand in the keys and start your life again. People really believe this.

http://en.wikipedia.org/wiki/Moral_hazard#...zard_in_finance

(Another clearer hazard is the popular view that the central bank or govt won't let house prices crash)

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I thnk rather than flippers it is the local developers getting rid of their stock that they were going to develop

Ah ... I buy this explanation.

That's a good fit I figure.

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