Lincoln Park Failed Flip

The example of NJ HELOC Heaven will now be a Sunday feature. Today's example is another failed flipper. Just guessing from the time period and property info, these flippers probably occupied the house while making their upgrades. This house features the unfortunate combination of peak price purchase and peak price renovation - which has shown to be a money losing combination. Lets take a look at the house -


Here is the property information

Priced at $309,900

Bedrooms:	2	Bathrooms:	1
County:	Morris	Property Type:	Single Family Detached
MLS Number:	2489560
Property Description
This cute 2 bedroom ranch offers an updated kitchen with granite countertops. Hardwodo floors throughout the home. Partial basement. Just reduced. Bring all offers. Call today.

Remember when selling real estate, spell-check is your friend - hardwodo

The house is cute starter home but the bulkhead in the front yard combined with the front French Doors some potential curb appeal is lost. This house is being sold by a realtor. Savva & Rabin Realty - who will make approximately $9,000 for their share as the selling agents - can not even spell hardwood correctly on Craigslist or on their own website.

Here is the financial information for the property -

• The property was purchased in Sept. 2005 for $215,000.
• The first mortgage taken Sept. 2005 was for $192,950 with Wall Street Financial Corp. the mortgage was closed May 2007.
• A second mortgage was taken Feb. 2006 for $10,299.40 with Beneficial Mortgage Co. This loan was closed in April 2007.
• A HELOC was opened in Aug. 2006 for $35,000 with Wall Street Financial Corp. WALL This line was also closed May 2007.
• In May 2007 another mortgage for the property was $284,250 with Freedom Mortgage Corp.
  
• The house is currently for sale on craigslist for $309,900.
  

The owners originally put down just over 10%, 0r $22,050 when they purchased the property. At the peak of the bubble 10% is a significant amount down. The owners proceeded to take out a series of mortgages the next year. This is probably when alot of the work upgrading the property was starting. It looks like the common story of under-estimating the price and scope of work exceed the original expectations. Less than 2 years after the purchase, the first two mortgages and the HELOC line look like they were rolled up and closed off with a new cash-out refi in May 2007. The cash-out appears to be approximately $46,000.

If the sellers receive an offer for the full asking price, after deducting the standard realtor fees of 6% ($18,594) the owners will net $7,056 for their work and investment during the last two years. Actually, when you consider all of the other closing costs to buy and sell the property as well as mortgage fess, this property is probably already at a loss. With the profit margin being so small, if the selling price of the property is below $302,500 the flippers will definitely lose money on the deal. Most likely they will either need to bring a check to closing or negotiate a short sale.

While the failed flipper is a sad story, the stories of the families losing money on their purchases are even sadder - like here, here and here.