House flipping is a hot topic in the real estate market, but it often sparks misconceptions about its impact. People tend to believe that flippers are driving up housing prices or snatching homes away from potential homeowners. However, the reality is far more nuanced than these assumptions suggest. In fact, house flippers play a vital role in stabilizing the real estate market.
Do House Flippers Take Homes Away from Owner-Occupants?
- Flippers Have More Costs: Many believe that flippers outbid owner-occupants, but the truth is quite the opposite. Flippers incur repair costs, labor, materials, holding costs, and financing expenses that homeowners usually don’t have to deal with.
- Owner-Occupants Can Pay More: Since owner-occupants live in the house, they can generally afford to pay more for a property than a flipper. This is because they are still getting a good deal while building equity in their homes.
- Livability Standards: Owner-occupants often use loans that require the home to be in livable condition. Flippers tend to buy houses that need significant repairs and do not meet these standards.
Why Are We Buying the Homes No One Wants?
House flippers typically purchase homes that are not in competition with those available to owner-occupants. These are usually properties that require extensive work, beyond what an average buyer can handle. By acquiring these homes, flippers prevent them from sitting vacant and deteriorating further.
Are House Flippers Raising Housing Prices?
- Appraisals Keep Prices in Check: Even after renovations, the final sale price of a house is usually determined by comparable homes in the neighborhood.
- Neighborhood Caps: In many areas, there is a price cap on homes, regardless of the quality of renovations. Exceeding this cap can lead to financial troubles.
- Low Appraisals: Some appraisers may undervalue a flipped house, assuming the flipper is making too much profit, thus limiting prices.
Do Flippers Just Put "Lipstick on a Pig"?
While some flippers may focus on cosmetic changes, most prioritize critical repairs. Ensuring that a property is safe, up to code, and livable is crucial for future sales. Inspections are vital for buyers, especially for flipped properties.
How House Flippers Help the Real Estate Market
Flippers add value to the market by:
- Adding Inventory: By renovating vacant and unlivable homes, flippers increase the housing supply for buyers.
- Revitalizing Neighborhoods: Flipping neglected properties enhances neighborhood aesthetics and prevents further deterioration.
In conclusion, house flippers are an essential piece of the real estate puzzle. By acquiring, renovating, and reintroducing unlivable properties to the market, flippers contribute to increased housing options. While some may cut corners, most flippers are not the villains of the housing market but rather play a vital role in its stability and growth.
