House-Flippers Target Foreclosure Sales

Big profits loom as lenders offload homes at auction

By Rob Quinn,  Newser Staff

Posted Dec 8, 2009 5:51 AM CST

(Newser) – House-flipping is making a comeback as investors seek fast profits from foreclosure auctions. Lenders are overwhelmed with property, especially in foreclosure hotspots like California, Nevada, and Arizona, and their haste to sell off their huge supplies of homes can mean big flip profits for investors with knowledge of local markets, plenty of cash, and a willingness to take risks.

"The banks are so screwed up" that they don't often don't realize the true value of the property they hold and set minimum bids far too low, one Phoenix-area investor tells the Wall Street Journal. Buying at auction comes with plenty of risks, however. There are no public viewings for the homes on sale, and many investors have ended up making a loss after discovering that occupants facing foreclosure had badly damaged the interior.

A house with a pool is advertised for under $80,000 in Stockton, Calif. Around a fifth of homes sold in trustee sales in the state now go to investors instead of lenders.
A house with a pool is advertised for under $80,000 in Stockton, Calif. Around a fifth of homes sold in trustee sales in the state now go to investors instead of lenders.   (AP Photo/Marcio Jose Sanchez)
A  for sale sign stands outside a bank-owned home in north Las Vegas.
A for sale sign stands outside a bank-owned home in north Las Vegas.   (AP Photo/Jae C. Hong, File)
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