Don’t be a flipping fool
Finding your property has been flipped for a killing can be really galling for vendors.
When Auckland real estate was running red hot, some property traders made a living by doing just that, and plenty still are finding under- priced properties and flicking them on for a hefty profit.
Stories of vendors who feel hard done- by hit the headlines all too frequently. But there’s nothing illegal per se about buying and selling ( flipping) properties for a profit.
Where it can become a problem is if a real estate agent encourages a vendor to sell for a price and then on- sells that property to a buyer, getting a double commission.
Even then, says the Real Estate Agents Authority ( REAA) it only breaches the law if the agent didn’t do the best job possible for the client.
Unfortunately, if it’s a private buyer and there is no real estate agent involved there may be no comeback.
Sometimes, says James Lockie, director of mortgage provider General Finance, a willing buyer might pay over the odds to secure a property. That doesn’t mean that the original vendor received less than market value.
The REAA says it has investigated 300 property transactions in Auckland looking for potentially dubious flipping. But it says most cases of properties being on- sold quickly at a profit don’t turn out to be illegal or unethical.
Even so, finding out the lovely buyer you just sold to was simply in on the deal to re- sell for a killing is going to leave a sour taste in the mouth.
Prevention is better than cure, and Lockie highlights a number of ways to avoid becoming a victim of flipping.
“Firstly, use an agent, interview several and then choose the most suitable,” he says.
“Secondly, learn from the agents that you talk with exactly what your house is worth. Ask your agent for a comparison of sales of houses like yours and drive by these properties. Do your own research.”
It’s a really good idea to get your own registered valuation. That way you know exactly what the property should be worth on the open market. People who haven’t bought or sold property previously or for many years should be particularly wary.
Lockie says it is important to get your own valuation if you are not using an agent.
“Most people do not work in real estate and it can be hard at times to know exactly what your property is worth.”
Cases do arise of alleged flipping from time to time such as one heard by the REAA where the real estate agent’s wife bought the property and on- sold it immediately at a profit of $ 60,000.
The REAA recommends that before choosing an agent, vendors check its public register of real estate agents, which shows any previous misdemeanours dating back up to three years; search its complaints decision database at REAA. govt. nz; and do an online search of the agent. Those searches should highlight any past complaints.