Fixing and Flipping Homes in Tucson?
June 23, 2009
I had an inquiry the other day from someone about to move into Tucson about potentially fixing and flipping homes along the Valencia corridor in Tucson - basically, the Southwest and the South side.
I gotta tell ya - that’s something I wouldn’t do right now, at least not operating in the open resale market. I think the idea was to pick up a foreclosed home at a steep discount, make repairs, and resell it for profit.
The problem is that in those parts of Tucson, pretty much the only thing selling is the foreclosures. If you find one at a crazy low price, I’d bet it is in terrible shape too. Which means even more cash you have to put into the thing.
Not to mention that prices over the last year in that area have fallen - on average - 3% a month. So not only do you have to recoup your repair costs, your purchase costs, the holding costs, and the selling costs in order to just break even - you lose money just owning the thing over a very short term because of the declining market.
It’s not a bet I’d be taking right now.
Declining Home Values in Tucson and Zestimates
June 11, 2009
Excerpt from my inbox: "The Zestimate dropped $5000! Should I still buy the house?"
Zestimates, for those of you not hip to the lingo, are estimates of home values from Zillow. Zillow isn’t a bad place, a decent starting point. However, it isn’t as accurate as I can usually be - I’m not an automated system, after all. And by their own calculations, the median error in Pima County is 9.5% - meaning half the homes sold were within 9.5% of the zestimate and half were further off.
So am I worried about one house’s zestimate dropping $5k? Not so much.
Look - we know prices are still declining in Tucson - in some price brackets faster than others. If you’re wanting to flip a house or sell it in 6 months, then yeah, $5k might matter. But those of us that live in homes for 5, 7, 10 years…
We’d all like to save that $5000. But if I’ll spend $850 in rent for 6 months waiting for prices to bottom out, then where did I really save that? Buying now isn’t the right choice for everyone. But for some of us, it still makes sense. Declining Zestimate or not.
Tucson market stats will be posted tomorrow… stay tuned!
The Daisy Chain
June 9, 2009
I was working with a home buyer last month who needed to sell their home in another state before purchasing here. Luckily, their home back East was already under contract and scheduled to close soon.
Except the buyer of my client’s home back East had to sell *their* home in California in order to buy the Eastern home. And luckily, they were already under contract with a buyer on that California home.
I call this the daisy chain. A pretty name for what can be an ugly situation. If the California buyer is delayed, then the Eastern buyer is delayed, which delays my client. One thing goes wrong up the line and we have issues. One thing goes wrong up the line - that we have absolutely no control over - and we have issues.
So if the California buyer needs to extend two weeks in order to finish loan processing, then the Eastern buyer is delayed at least 2 weeks because they need those proceeds in order to close on the Eastern house. Which puts my client back about 3 weeks before funds arrive from the sale of the Eastern house in order to purchase one here.
You know what can happen in 3 weeks? The good houses at the great prices are selling. So we lose out on some really nice properties because someone in California can’t get their act together.
Don’t get me wrong, me and my client have options. And sometimes, this scenario isn’t avoidable, given other goals. We’ve discussed the various risk scenarios so that my client can make the best decisions possible. But if we didn’t have to deal with a daisy chain, we’d be in a much stronger, more flexible position.
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