MYRTLE BEACH, S.C. -- What started as a hobby for Keith Gamble is now a risky, exciting, full-time job: buying properties at the monthly foreclosure sale and flipping them.
Gamble, and others like him, are a new generation of property flippers who buy at low prices at a foreclosure auction, clean up a property and sell it for a profit.
"Some people's bad fortune is other people's opportunity," Gamble said. "I know that sounds callous. ... I know people doing what I'm doing at the courthouse each month are there to take advantage of that opportunity, but I also feel we provide a backstop to the market."
Today's flippers differ from those during the real estate boom who took advantage of rapidly increasing prices and were fueled by loose lending regulations, said Tom Maeser, a real estate analyst with the Coastal Carolinas Association of Realtors. When the market collapsed, many of those flippers were stuck with properties they couldn't afford, he said.
"That really irritated a lot of people and caused problems," Maeser said.
The flippers during the market peak would often buy a property before construction, wait for it to be built, hold onto it for a few months and then sell it for a profit. Today the flippers are buying at low prices, doing some minor repairs and then trying to sell the properties quickly. The profits aren't as large but the flippers may be selling more properties in a year, said Penny Boling, the broker-in-charge of Century 21 Boling and Associates in Myrtle Beach.
Flipping properties isn't something new, she said; it's just taken different forms over the years, and it hasn't always had that name. Boling said she sees some differences between today's flippers and those during the boom, including their knowledge of the market.
"They are really doing their homework on what prices are," she said. "Before, the market was going so fast no one was looking."
Many of the foreclosure flippers will attest to the hours of work they put in; several said they spend upward of 60 hours leading up to the auction doing research and trying to see properties they might want to buy. Unlike a typical property purchase where a buyer can see the property and get a home inspection, often a buyer of a foreclosure at auction has little access to a property and sometimes must bid without seeing the inside of it.
"There's just a lot of research involved in it," said Johnny Buxani, a Realtor who also flips foreclosure properties. He will look through a list of properties for sale, identify the ones he is interested in and then try to drive by them to see them. Once he narrows down the list, he looks at the market value and establishes how much he would be willing to pay and how much he thinks he could make on each property.
It's important to know about the real estate market to know about any problems with developments or buildings and to be up to date with how prices are changing, Buxani said.
Armed with those papers and a budget, he heads to the monthly foreclosure sale and tries to be the winning bidder.
"It's really gambling," Buxani said. "It's a rush."
There is often competition among bidders on the best properties, but most have a set cutoff price. The winning bidder has to pay a 5 percent down payment within 24 hours and the remainder of the price within 30 days. Unlike flippers during the boom, these buyers aren't piling up loans that they can't pay back. Instead they're paying cash either from their own money or with the backing of investors.
The flippers are helping fix up foreclosure properties that are often left in bad shape and hard to sell, which is good for the market, Maeser said.
"Anyone who depletes the foreclosure inventory is helping the marketplace because we will not see appreciation or increases in values until foreclosures go away," he said.
Galfetti and the others said they know the volume of foreclosures and current opportunities won't last forever, but said they are an important part of the market.
"It's unfortunately the whole state of the union but we're doing a favor to the lowest end of the market, which has to get cleaned up before the regular stuff can sell," Galfetti said.
Boling agreed that their ability to pay cash and get rid of foreclosures is helping the overall real estate market.
"They're kind of like the street sweeper," she said. "They're part of the cleanup committee of this marketplace."
Maeser said that it's unclear what impact the foreclosure flippers will have on prices. Flippers could help improve property values in a neighborhood if they price properties fairly, but if they are selling properties below the lowest price in the neighborhood it could have a negative impact.
The properties flippers sell are typically priced at market value, though they try to be among the best priced in an area, Galfetti said.
"I don't feel we are contributing to lower prices," Gamble said. "I feel more we are getting inventory out of the banks' hands."
If banks were lending more, there would be less of a market for flipping foreclosures, he said.
"In a couple years, these opportunities will dry up, banks will be lending more and inventory is getting depleted," Gamble said. "This niche market might disappear or get very limited."
Boling said that sales activity is starting to pick up and she expects foreclosures to decrease as the market improves.
Galfetti and Buxani said they'd change their focus once the opportunities to flip foreclosures dwindle.
"I obviously hope it does dry up and the whole market and whole economy turns around, (but) I don't see it happening anytime soon," Galfetti said.
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