Rollin' Like Sisyphus

The Jobs Americans Won’t Do

Posted in A Chronicle Of Decline by Huckleberry on May 12, 2015
There's a metaphor here if you squint hard enough.

There’s a metaphor here if you squint hard enough.

So the house across the street from mine went up in flames yesterday, which would be completely unworthy of note except for two things.
1) The current owner is a house flipper who, and I quote, is “way over budget” and hired two Salvadorians from the parking lot of Home Depot to plumb and wire the “extravagant” remodel for $500 and 2) you get what you pay for, since there’s nothing quite like the simmering of an electrical fire to really cook a house down to nothing.
So the stupid flipper who already bought high ($800K~ range), put in another $200K and had hoped to clear $1.5M is now likely out all of it minus lot value because he went cheap on the one thing you don’t go cheap on. The retard is out all of his investment money, is carrying a hefty debt load because a lot of the project was financed, and I doubt he’ll see any insurance money given who installed what.

Meanwhile, at least three times a week I’ve got people coming to my door offering suitcases full of cash for my house; odd looking people wearing ill-fitting suits, the kinds of people who obviously don’t wear suits for a living and yet are pretending to, claiming to represent parties with 100% cash offers. “All-cash” offers that somehow switch in escrow to 20% down and a bank finance note. From talking to some of the ones who’ve sold, what seems to happen is this:

1) Homeowner is approached with cash and asked how much he’d sell for. Owner throws out a number — any number — and it is immediately accepted verbally. Cash is given to homeowner as a “holding fee”.
2) A day or two later the homeowner is contacted by a lawyer and a broker representing the buyer. The two are pushy, and desperately want to fax over an intent-to-sell contract agreement before the homeowner is represented by his own broker. So far, no one I’ve talked to has agreed to this.
3) Brokers and lawyers work out terms — all cash — with a 30-day escrow. The one seller that actually bothered to pay attention notes that the all-cash position was based on 33 people depositing money into an account to show liquidity, then 32 of those people pull out their money during escrow leaving 20% of the sale price plus points and fees.
4) Escrow pauses while bank financing is secured for the remaining sum.
5) Escrow resumes, then closes. On the very next day “construction” begins and the “flip” is on.

So far I have yet to see a successful flip in the neighborhood. There are a bout 7 in progress, and 2 on the market waiting to sell. I don’t think they’re all the same people, but they are clearly groups of people using the same tactic, like one of those seminars maybe came through town last year convincing everyone to UTILIZE THIS FAILSAFE SYSTEM to flip homes and churn profits.
The entire thing is just unsettling, because one of these times I’m just going to say yes and literally buy the farm.


4 Responses

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  1. El Borak said, on May 12, 2015 at 10:33

    Ah, yes, the old ‘failsafe system,’ which for some reason is always called that by people who make their money selling the system instead of using it. He who hath ears, and all that.

  2. Giraffe said, on May 13, 2015 at 10:45

    The more of these flips flop and the harder it’ll be to find a sucker to overpay for your house.

    My wife was watching the flip flop shows on Netflix. I think they usually make money there but I don’t pay attention.

    One supposes the key is to buy what nobody wants and change it into something everyone wants. Not to randomly slap down cash for a house, give it a minor facelift, and boom big profits. I mean that could work if the average homebuyer around there is an idiot, and is willing to pay 200 grand for 50 grand worth of updates. Most of the articles I read when I was house hunting said that most of the improvements you make don’t even pay for themselves. I don’t know. I put new windows and siding on mine and the appraisal doubled.

    If you sold your house for 1.5 million, you could come here and buy the same house for $150k I’ll bet. Of course you’d have to milk cows for a living.

    • Huckleberry said, on May 13, 2015 at 14:52

      For whatever reason, about three years ago my neighborhood got put on the Hipster Hype list and has been “in demand” ever since, both in residential real estate and awful business endeavors.
      The flippers figure they have a sure thing slapping minor facelifts on old Craftsman homes to Westsiders desperate to flee congested streets, overdeveloped multi-unit housing and burdensome local regulations/fees (even by California standards) and so far that’s been holding true.
      And it will continue to hold true until the exact minute it no longer does.
      Whatever happens after that should be a sight to see.

      If you sold your house for 1.5 million, you could come here and buy the same house for $150k I’ll bet. Of course you’d have to milk cows for a living.

      I see no downside to that at all.

  3. JN said, on May 20, 2015 at 11:00

    Bah. You could get the same house here for $250k and not have to milk cows.

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