SHORT SALES FLIPS vs. TRUSTEE SALES

Let's hear the opinions from those experienced:

Taking into account the spread potential, current legal climate, competiton, and risk, which of these 2 business models has and potentially will fare better than the other and why?

Edited: 06/26/2010 at 10:33AM by Tim Silvers

Brian Wall

Real Estate Investor · Santa Fe Springs, California

166 posts
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Icon_minipost Nov 17 '09, 11:19 AM

How much cash do you have to work with?

For trustee sales you need a good amount of cash, in California, you need to pay 100% at auction.

Edited: 06/26/2010 at 10:33AM

Vikram C.

Real Estate Investor · Phoenix, Arizona

1457 posts
25372 Influence
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Icon_minipost Nov 17 '09, 11:29 AM

In the Phoenix Metro, the average trustee sale that is sold to third parties is priced at around 80% of ARV. Too many bidders. This is partly because it is very easy to bid on a property using a bidding service so everyone is into it.

Short-sales require a little more work and patience and can be rewarding if you are willing to put the effort.

Edited: 06/26/2010 at 10:33AM

Tim Silvers

· Las Vegas, Nevada

106 posts
823 Influence
3 Awards

Icon_minipost Nov 17 '09, 11:34 AM

Originally posted by Brian Wall

How much cash do you have to work with?

I have located a source of unlimited funding @ 100% LTV so long as I keep within certain parameters, just haven't put together any deals to see how it's going to work yet.

Edited: 06/26/2010 at 10:33AM

Tim Silvers

· Las Vegas, Nevada

106 posts
823 Influence
3 Awards

Icon_minipost Nov 17 '09, 11:45 AM

Originally posted by Vikram C.

In the Phoenix Metro, the average trustee sale that is sold to third parties is priced at around 80% of ARV. Too many bidders. This is partly because it is very easy to bid on a property using a bidding service so everyone is into it.

I am in Vegas and have been in touch with an agent who specializes in fix-n-flips purchased at t-sales. He claims the spread on average is 20%, turnaround time approx. 60 days, 20 closings a month. He makes his money when the property is sold to an end buyer. According to the agent, it isn't even a rehab since the budget is never more than $2500 per deal, just a super-light cosmetic touch-up and it's on the MLS with multiple offers, mostly from Canadian buyers.

It's hard to imagine Phoenix being more competitive in bidding than Vegas which makes me take a step back to look into this realtor's model more thoroughly.

Edited: 06/26/2010 at 10:33AM

Vikram C.

Real Estate Investor · Phoenix, Arizona

1457 posts
25372 Influence
14 Awards

Icon_minipost Nov 21 '09, 09:37 AM

Phoenix and Vegas are probably somewhat similar markets. Your agent could be telling you the truth. The data I have are just averages and I am sure there are some people who are buying cheaper and some who are paying more. It's just that the average purchase price at trustee sales has been trending up and you have to bid on more and more properties to get one.

I met a guy the other day who does this for a living and he said he now bids on 100 properties to get one at 70% of ARV. When you count his cost of checking out the 300 properties or so to find 100 to bid on, his real acquisition cost is probably close to 80% of ARV.

Edited: 06/26/2010 at 10:36AM

Steve Babiak

Real Estate Investor · Audubon, Pennsylvania

3895 posts
74586 Influence
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Icon_minipost Nov 21 '09, 01:27 PM

At my local sheriff sales, I'm seeing a lot more properties having the starting bid discounted below the debt owed - kind of like a short sale in a way, but without that negotiating with banks. I'd imagine you'd see similar discounting at your trustee sales too.

Edited: 06/26/2010 at 10:36AM

Vikram C.

Real Estate Investor · Phoenix, Arizona

1457 posts
25372 Influence
14 Awards

Icon_minipost Nov 21 '09, 05:51 PM

Yes, many of them are discounted below the amount owed but typically to the FMV of the property, which is not useful to us as investors. There are a few properties that are reduced to below FMV and those are the ones where there is a bidding war between different buyers.

Some of the buyers are retail buyers and it is understandable that they would want to pay more than 70% of ARV. What's less understandable is that even the investors are willing to pay a lot more.

Edited: 06/26/2010 at 10:36AM