Santa Ana: Third Time’s a Charm for Flipping

In perusing the sold stats in Santa Ana, I came across a curious one that closed in late June. Three bedrooms, one bath, and only 957 square feet, 1415 South Shelton Street makes for a small house. However, the house does sit on a lot of a little more than 6,700 square feet. So, what makes this little house sell when there are so many other houses for sale in Santa Ana?

1415-s-shelton.jpg

(Blue house flag marks 1415 S Shelton – to the right of the blue roof.)

From the stats, I’m thinking this house was bought after foreclosing in December 2005. The buyers only paid $24,118 for it. This fact combined with all the work done on the place leads me to believe that this house was a flip. New carpeting, new window, new fixtures, and new floors were put in. The kitchen was remodeled with granite countertops, dishwashwer, tiled floor, and new cabinets. The bathroom also got a facelift with granite countertops, new sink, new cabinet, and new floors. And, of course, the entire inside was freshly painted. That’s a lot of work… sounds like it took them a year and half, too.

I bet when these “investors” bought the place, they thought they could knock out the work and get it sold for twenty times their purchase price. In early 2006, the market was just beginning it’s big slow down. Well, fast forward to 2007 and 2008 and you’ve got one mess of a market. However, these flippers still have a success story. With their purchase price, renovation costs, and mortgage costs, I’m guessing they still made out on this deal with a pretty penny.

So, back to the question about how did this small house sell in this market? Well, price was huge. Before selling, it was down to $339,000. Nearby homes (of similar size) are well over that ($575,000, $475,000, $429,621, and $350,000). The house did sell for $320,000 (6% below asking) in late June. The price combined with renovations made this house more desirable over its competitors. While the end tells a success story, it is clear there was a rocky road to get there.

The home was listed before I started blogging… over year ago. I know that at one point it was at $479,000 last summer. Like most homes that are on the market for awhile, there are a lot of growing pains in coming to terms with the market and/or finding the right real estate agent. Many times, I see people pull their house off the market and list it with a new agent thinking it was the agent that was slacking on the job. Well, more often than not, it’s the sellers inability to understand their house is priced too high, not the agent’s sales force. The bottom line is that price and condition of the home sell homes, not an agent finding the right buyer. Aside from going from one agent to another, it also looks like these sellers had a couple offers that fell through. First in March and then again in May, they were in escrow. Was it the banks that made the deal fall through? Bad inspection? We’ll never know. However, for these flippers that stuck with it and finally lowered their price to a real attractive number to buyers (a requirement in this market!), the third time proved to be the charm.

Listing History:

Date N/A: Listed or reduced to $479,000

Aug 16, 2007: Reduced to $469,000

Feb 6, 2008: Listed again for $399,900

Mar 9, 2008: Reduced to $369,900

Mar 19, 2008: Listed again for $349,900

Mar 22, 2008: Increased to $359,900

Mar 27, 2008: Offer accepted, in escrow

Apr 20, 2008: Back on market, reduced to $349,000

Date N/A: Reduced to $339,000

May 10, 2008: Another offer accepted, in escrow

May 24, 2008: Back on market

June 2, 2008: Yet another offer accepted, in escrow

June 26, 2008: Closed escrow… SOLD!

  • http://REHound REHound

    Buyers who might be interested in this neighborhood/home may not have the kind of credit required to borrow purchase money in 2008. That could explain the multiple escrow cancellations.

    At the $320,000 price, this home starts to make sense as a rental. Craigslist rentals has similiar homes in the $2200/mo range (and probably without the nice upgrades). After taxes and insurance, an investor might net $20,000/year, or a return of 6.25%. Not bad when CDs pay 3% and the stock market looses more than it gains lately. Perhaps it was purchased by a wise investor.

  • Dominic

    The 24k purchase price seems odd, perhaps a family transaction or the price is erroneously reported maybe. The 2007 county assesed value of the home was 435k so I doubt an independent flipper actually bought it for 24k. Maybe a family member flipped it.

  • http://orangecounty.redfin.com/blog/author/julie.lance Julie Lance

    REHound,

    $2200/month seems high for rent for that area. I checked craigslist and it looks like the $2200/month would be for a house with 3 bed/2 bath and over 1500 sq ft. This house only has 1 bath and 957 sq ft.

    Still, with a healthy down payment and rental income at least $1700, this could be attractive to an investor.

    Dominic,

    Good point about a family transaction. Foreclosures are shown the same way in Redfin… awfully low but you never know. Who’s got the number to these sellers? Let’s call ‘em up and find out!