I’ve been walking to work and everyday I passed by this house that is being remodeled for the last couple of months. It was bought in November 2007 (it was a FSBO - for sale by owner) for $400,000. The owner have done a lot of changes from changing the floor into a hardwood, remodeling the kitchen, remodeling the garage, new front door and garage door, new paint, new patio furniture, blinds, etc.

Everyday, I can see the improvement and just last week, they already put up the sign - “For Sale By Owner -By Appointments Only.” They also put up the “Open House.” One of these days, my wife and I would probably go into one of the open house session so I can see the changes inside. One advantage of this house is it is in a corner lot and has a huge backyard. Zillow is estimating it at around $460,000 so for all the changes that they made, the flipper can make a handsome profit of $60,000 in four months of work. But I’m not sure if they are selling it at Zillow’s estimate, it might be selling for more that is why I am really interested in seeing it.

The problem with the real estate market today is that no matter how good the price is, it is still hard to sell. The credit standards have tightened and lenders are requiring 20% downpayment now. So how many people would really qualify for that? The median salary in our area is around $60,000. With that in mind, the median salary can only qualify for a $200,000 home. In addition, who has $100,000 downpayment nowadays?

So that flipper will be in for a big surprise if after a year, the house is not sold yet. He might need to drop the price and lose big bucks. Or if he is unable to make the payments, he would probably foreclose as well!!