Flipping in today's real estate market
I just saw this house go up for sale in my neighborhood, it is the former model (very nice) that the builder just sold for $295,000 is right back on the market for $329,900. Now I really don't know how anyone plans to make money on this deal but someone is apparently trying to. Let's look at the Risk vs. reward. The builder originally put the house on the market at $329,900 and no one put a contract on it, it was reduced in price to $299,900 and it went under contract and subsequently closed at $295,000. Has it really gone back up 10% in the past month when prices are stable at best to slightly lower if you have to sell? Let's take the costs of selling into account and what kind of margin for error is left. With a full price offer at $329,900 (not likely but....) figure a 6% commission coming to $19,794, deed prep and tax of $1321 and you are at approximately $21,115 so the best possible net would be $13,785. But with a typical list to sell ratio of 96.5%, the best offer should be only $318,353, round it down to $318,000, deduct commission and closing costs of approximately $20,000 and you are at $298,000, you paid $295,000 + whatever your closing costs were and you are now at break even at the very best and if it doesn't sell within days (it won't), the carrying costs of owning the house have got to put you in a negative position very shortly. I can think of better things to do with money than this particular investment but if you want to flip, I would suggest adding some value and analyze the risk and the reward.