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Property Flippers Getting Flipped Off Foreclosures

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By : Jacquelyn Marks    99 or more times read
During the real estate buying balderdash investors enjoyed from the late 1990s into the early 2000s, purchasing distressed real estate was commonplace, especially in large portfolios. The concept was simple: Purchase devalued land or property at massive discounts, renovate as needed, and then flip the finish product off the portfolio for a major profit before the market normalized.

Unfortunately, the flippers eventually began to dump their distressed properties because entire neighborhoods – like Cleveland, Ohio, which will demolish 20,000 distressed homes this year – soon began to drag down collective housing values. Check out some interesting tidbits from around the country that prove the realty market is still heading southward.

Illinois Investors Running

Companies like MACK, Chicago’s premier property management and repair firm, are unloading their properties to the likes of Scottsdale, Arizona-based American Residential Properties in hopes of recuperation of monies invested around the city since 1997. Predominantly known across the state for many real estate calamities from the Chicago Fire to getting the angular lean correct on the Sears Tower, commercial property is being forlorn in investor portfolios, especially since single-family dwellings are hotter commodities. Where, however, will investors look for distressed properties? Here’s affirmation.

New York, Florida Topping Distressed Property Havens

Released March 26, 2013, by law firm Cole Shotz, news of New York andFlorida foreclosures topped the distressed real estate marketplace didn’t exactly stun analysts. Considering NASA pulled its funding away from the area and whacked more than 14,000 jobs in the process, people have been scrambling to make mortgage payments, or move as far north (and west) as Seattle, Wash., while cutting equity losses. New York hasn’t been adversely hit by corporate pullouts, yet millions still struggle as their 99-week unemployment benefits dwindle to nothing, forcing deep pulls from savings or causing families to walk away completely from mortgages.

Any property sitting in neighborhoods with numerous For Sale signs lowers the overall collective of homes. Investors, meanwhile, are once again starting to gobble up these homes, stuffing them in portfolios and hoping for swift upswings in financial turnaround for the millions inhabiting these two key finance states.

Short Sales Could Be Worthwhile

Those homeowners, and investors, who are tired of paying $50,000 more than their home is worth sometimes choose to escape the mortgage enclave by short-selling their homes to either pay off their remaining balances and hope for some cash-out benefits. First-time buyers then snatch up that property for face value without getting stuck into an overpriced mortgage, and everyone wins … theoretically. The headaches of choosing distressed properties, including fearing immediate devaluation of home upon closing, loom amongst investors interested in distressed sales. However, moving away from a $1.9 million mortgage because a home is worth $750,000 sure sounds enticing, and many investors and first-time buyers are snatching these up in hopes their property values will soon exceed their mortgages – a dream for anyone.

Looters Don’t Exactly Help

CNBC recently brought their cameras into Cleveland Heights and surrounding areas to see just how 1/3 of the city could be ridden by distressed properties, and why thousands of homes – structurally perfect – are getting ripped down. One alarming reason these homes are quickly losing value falls into the hands of looters.

Copper wiring, aluminum siding and even kitchen sinks are being heisted from abandoned foreclosures to supplement poor family’s incomes while the owners suffer the devaluation. Once these homes bottom out in value, investors and home buyers shy away, creating the ‘Domino Effect’ in neighborhood home devaluation. The hope is that by tearing worthless properties down, the remaining good-standing properties will again increase in value. Cleveland is pouring millions into this teardown project with the promise of eventual city stability.

Cities like Cleveland aren’t alone in the distressed property battle. Perhaps even your city has more realtor signs plaguing your block than ever before. Until the financial battle in Wall Street is won, Americans will continually pay inexorably for homes that aren’t worth the cheap lumber they’re built with, and investors will snatch these up for portfolio ‘padding’. Or run from them completely. And the distressed property cycle will continue on. is the leading online distressed property listings resource.

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