I California the assessment is base on purchase price. Proposition 13 back in the 70s did away with revaluing the home based on upswings in the housing market. Back then people were being priced out of homes that they had lived in and owned outright for years and years. It is a little more complicated than described but that is the main point.
It’s not as if this is unusual. A factory spends $1.00 in parts and labor to build a widget, and sells the widgets for $5.00 each because that’s what people are willing to pay. Doing productive work often adds value in excess of the cost of the work – this is one of the ways that markets create wealth.
Contractors have a lien on a house that survives sale?
That’s the purpose of a lien. Title to the house cannot be transferred until the lien is settled.
One of those shows recently had a guy on who priced his flipped house 20k more than the other houses in the area, and the other houses were better quality in better condition. At the end of the show it said it had been on the market for months and the guy would definitely lose money on the monthly note alone.
I think a few of those shows stretch the truth a bit- they show a house being completely gutted, rooms added on, complete landscaping, fencing, lighting, plumbing, and only spend 40k or so- I know day laborers are cheap, but not that cheap- the salary for 10 men for three months even at day labor rates would be several thousand.
And one chick who bought a completely trashed 800 sq foot house in a bad Pasadena neighborhood for 300k, and put it on the market for 1.2 mil, I wonder about those as well.
Side question- I see infomercials where some guys claim they buy and resell a house without a dime of their money- is this true? And how is that done?
The THEORY is that you can buy a house with no down payment and then sell it before the first payment comes due. In reality, this hardly ever works out.
These guys make their real money by selling their “method” to the suckers who watch infomercials.
As adam yax touched upon, through the neighbors eyes, house flipping is a matter of some interloper coming in and being disruptive. Add a few TV cameras and foofy spokesmodels, and you’ve got a real fine boondoggle. Not to mention it’s likely your new neighbor is a dupe.
So, one of the downsides of house flipping is that people who consider their neighborhood home don’t like it being used for carpetbagging speculation. The new neighbor is unlikely to be greeted with smiles and fresh-baked pies.
Well some liens survive sale and some don’t. But what really surprises me is that a contractor has a lien at all. Is that commonplace in the US?
Yes, and in Canada. Variously known as a mechanic’s lien, construction lien, builder’s lien. Here’s the relevant Ontario statute, for example.
I’m not sure how things work in Australia, but it seems to me that a lien that did not “survive sale” would be pretty worthless.
In the US, the function of a lien is to “prevent” sale by not allowing transfer of title (of a house, car or other property) until the debt is settled and the lien removed.
In most cases, it is the responsibility of the seller to make sure that all liens are satisfied before the sale is closed. In the event of a bank repossession, however, that onus may well be shoved off to the buyer.
I don’t really understand this. My husband and I have flipped a few houses (did well, not 100K well, but quite good) and the neighbors were always thrilled to have someone come in and fix up the abandoned dump on the street. We always had wonderful relationships with the neighbors. And when we sold the houses for a lot more than we bought them for, they were thrilled about that too, because it raised the comps for the neighborhood for when they wanted to sell. Maybe it’s because the properties were in Arkansas, where the property taxes aren’t very high, but who doesn’t want their property value increased?
Don’t forget about capital gains taxes if the house isn’t your primary residence.
Actually, you’re right about that aspect, and I failed to include that in my post. Indeed where the house or neighborhood in question actually needs someone to come in and improve it, then it can be a good thing.
I think this varies by type of neighborhood/housing market. In my neighborhood, houses are expensive and small, but it is decidedly middle class, for the most part. Some folks have come in and demolished the modest middle class house and shit out a gigantic McMansion with cupolas and other bling, actually blocking the neighbors’ sun and generally sticking out like a sore thumb. These are the kind of neighbors that aren’t generally welcomed. We don’t need to raise property values here or have blighted properties in need of “rescue”.
That’s not a cautionary tale about flipping, it’s a cautionary tale about being a criminal. Casey Serin committed several acts of mortgage fraud, used his wife’s and relatives’ names to obtain credit for himself, and sundry other heinous crimes. Then he fled to Australia for a while to avoid his family who have rightfully turned their back on him, but eventually came back. Now he’s being investigated by the FBI, and indictments are rumored to be around the corner.
True enough, I didn’t mean to imply that this was indicitive of flipping, or that flipping is inherently bad, just that the mindset that flipping can bring quick money can potentially lead you down a bad path.
Call me a left-brained namby-pamby liberal or whatever, but a major downside IMHO (where this thread should be, btw) is that it turns something that should be very intimate and personal - a place to live, one’s home - into something speculative that drives up prices and keeps homes away from more people that would like to own them. This is A Bad Thing.
You’re a left brained namby-pamby liberal.!
Seriously though, if you are in the market for a house, you have some ideal in mind. You may be the type who enjoys fixing things up around him. Good, then you buy the rundown building and do the rehab.
Others may be the type that like to buy their houses all shiny, new and clean. They buy them from someone who has done the work already. May be a new home contractor, a homeowner moving on, or a flipper who has fixed up an older or neglected home.
Especially not now. Our paper today had an article about people making over $150K a year with excellent credit not being able to refinance because they had no equity in their houses, and the mortgage company is betting that prices will be going down.
I thought a few of these schemes involved putting a down payment on credit cards.