Flippers Rule in Some Sacramento Markets

June is shaping up to be a pretty good month for my real estate closings. I’ll probably have more sales close in June than any other month this year. I just closed a regular home sale in Curtis Park. This was a beautiful brick home in the St. Francis Oaks subdivision. Everybody who saw the home said pretty much the same thing about it: it was gorgeous but it wasn’t updated enough for their tastes. So, it sold to a flipper. I am seeing many homes in Sacramento sell to flippers nowadays, which is a stark contrast to 5 years ago.

It’s a challenge to negotiate between the two parties, to give a flipper enough room for a profit and to give a seller enough money to make the seller happy. But that’s a challenge I tackle day-in and day-out. My seller’s happiness and satisfying my seller’s goals is paramount to me.

It’s rare to sell a home in Sacramento over $300K without updates to a first-time home buyer. Like I’ve said many times, it’s the Sacramento flippers who originally focused on foreclosures who are to blame for the changed attitude of today’s buyers. There are tons and tons of rehabbed homes that have been resold. I’m not saying there is anything wrong with it because flippers have taken older, abandoned homes in disrepair and turned them into turnkey homes for first-time home buyers. That’s a good thing.

Sacramento flippers are actually good for neighborhoods. They revitalize downtrodden areas. Goodbye boarded-up homes, hello sparkling new stucco and shiny gutters. But they also shape buyer’s expectations, often unrealistically.

It’s no longer enough to buy a home with good bones and potential. Buyers don’t want those homes. Not when they are tempted by all the rehabbed inventory on the market. So the only surefire way to move homes without updates, which are now called fixers, is to sell them at a discount to compensate. The problem that arises for sellers who want to fix up their own homes is a seller cannot compete with a flipper. Because the average seller can’t buy materials at wholesale, nor do most ordinary sellers have access to low-cost rehab crews.

If a seller improves a home for resale, the seller is quite likely to lose money on the sale. A seller doesn’t generally enjoy the profit margins that flippers possess. So, that means the homes that need updates are more often than not sold to flippers.

Last year my database held very few flippers. Not so today.