If foreclosures are your go-to for home flipping opportunities, take note: According to recent data, foreclosure starts hit an 18-year low in August and they’ve gone down nearly 25% in just the past year.
Property data firm Black Knight recently reported that just 36,200 foreclosures were initiated last month. The total number of active foreclosures (253,000) is now at its lowest point since 2005.
Overall, just 3.45% of properties were delinquent in August. Here’s how the numbers look compared to July and over the year:
Some states buck the trend. In Mississippi, for example, the number of non-current loans is up 9.26% since last year. In Arkansas, they’re up 7.56%.
Still, foreclosures are trending downward overall, and home flippers may want to start looking elsewhere to find potential properties.
Here are just a few of the places you can look:
Real estate wholesalers are always on the hunt for great properties, and some even specialize in finding potential fix-and-flips for investors.
Although many wholesalers tap auctions, sheriff’s sales, and REOs to find properties, some work directly with homeowners, convincing them to sell even when they weren’t planning on it. This means wholesalers often have access to properties that haven't been listed on the MLS or any other public outlet.
2. Motivated homeowners
To cut out the middleman, take a similar approach and reach out to potential sellers directly about their properties. If home prices are high and mortgage rates are low (like they are now), owners might be willing to sell their house and move on to a new property.
For sale by owner properties, also known as FSBOs, can be a solid option for flipping leads. You get to work with the seller directly, making negotiations easier and faster. Additionally, FSBO sellers may be more willing to wiggle on price -- especially if the home’s been on the market a while.
Offering cash and an easy, mortgage-free closing may just seal the deal.
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4. Short sales
Some lenders let homeowners avoid foreclosure by selling their homes. Short sales can be a good way to snag a low-cost, high-potential property, but they also come with some complications.
In most cases, short sales are only an option when the house is no longer worth what the current loan balance is. You may need to make significant repairs to bring the home’s value up or hold the property until the local market strengthens.
Another quick word of caution: Short sales come with a complicated process that requires both seller and lender approval. If you go this route, consider partnering with a real estate attorney or agent who knows the process.
5. Investment-focused agents
Finally, working with a real estate agent who’s well-versed in investing can also help. These agents may have their fingers on the pulse of up-and-coming properties that could fit your needs, and their hard-won negotiating skills can help you get a good deal.
Just make sure you choose an agent with a wide network and great communication skills. You need someone who knows the market and can keep you ahead of the competition.
The bottom line
Foreclosures may be down, but they’re not the only source fix-and-flip investors have to work with. Partner with wholesalers and agents and consider reaching out to sellers and homeowners directly.
And remember, house flipping isn’t the only way to invest in real estate. REITs and crowdfunding also offer solid avenues for financial growth, so consider diversifying your efforts and branching out the next time potential flips are scarce.