Flippers Priced Out of Market Now?

[Tim Silvers]

An alternate title for my post could be 'Flippers and the Law of Diminishing Spreads'!

I am in the Las Vegas market and am running up against the same issues I am repeatedly hearing for other markets in that the pricing for trustee sales and REOs are getting bid up to nearly list which wasn't the case a year or even as recent as 6 mos. ago. That being said plus the fact that short sales are also becoming increasingly difficult to buy at enough of discount makes for a non-existent market or at the very least slimmer profit margins for the active flipper. That is, unless your exit strategy is to sell at above market to unsuspecting buyers who don't care (show me where these folks are, please!).

Everywhere you look, it has become saturated with cash retail buyers and buy-and-hold investors who don't mind paying 90 cents on the dollar and just look at getting a better return than a lousy 2% CD which makes zero sense to me! Us flippers don't stand a chance competing with this segment. And as Marty Boardman has made it clear in today's blog [ (http://www.biggerpockets.com/renewsblog/2011/03/03/the-incredible-vanishing-bulk-reo-seller), bulk REOs at pricing that makes sense simply don't exist.

So what is your search criteria now? 90+ DOM? Pre-list/pocket listings? Major rehabs?

What about the public REO auctions like REDC, or are they largely a waste of time?

What other choices do we have???

[J Scott]

At least in my market, things are very cyclical (or at least ever changing)...

There will be periods of weeks or months where we find it difficult to find any properties that meet our criteria (this often happens during the summer and around the winter holidays) and then we'll see weeks or months where lots of great deals hit the market without much competition (beginning of the year and September/October are notoriously good)..

We now try to buy as much as possible during the "good" times, and don't stress about the lack of inventory during the "bad" times, knowing that things will soon change.

For reference, the past two months have been pretty good in my area -- we've purchased three properties and have a couple more we're currently negotiating. I expect in a couple months things will dry up again for a while.

Perhaps if you look closely enough, you'll find the same types of cycles in your market, though they may not line up the same way...