[molyss]

I have come to see house flipping as a horrendous scam that kills the economy and is all but sustainable. And real estate agent are complicit and making the problem worse because it’s making them money

One of my accountances is a professional house flipper. They claim to regularly make over 100k of profit on a single house in less that 3 months. Keep in mind they contract out all the manual labour.

The 1st step is obviously to find a house, preferably before it hits the market. Then, contact the seller’s agent and promise them that if they sell you the house for a good price you’ll go through them when you sell the house after having flipped it. At this point, the agent’s incentive is disconnected from the seller’s: If they can convince to sell off market, they’ll sell quicker, make the commission on a lower price but expects to make a much higher commission on the 2nd sale than what the 1st one would have fetched. The seller gets fucked.

Then, the flipper finds the cheapest contractor with immediate availability. cheap+available is usually a bad sign in term of quality. They have them do the minimal work to make the house “look good”. No deep electricity, certainly no plumbing, rooftop or foundations.

After a couple of months. Put on the market. At this point, you want to put it on the market at (original price paid+original agent’s fees+second sale agent’s fees+remodel cost+your sizeable margin) that ends up easily increasing the original pricd by 30%, sometimes more.

The buyer gets fucked too because they pay extra for shitty work. They’ll have to do more work on the house, both short term and long term.

But the ones who get really fucked are the other potential buyers : it’s super hard to find a house that wasn’t flipped, prices go up because everyone wants whatever the neighbors house got sold for, there’s even less contractors available

I’m convince flippers have a negative impact on society at large.

[meowkit]

Middle men generally have negative impacts on society overall once they become entrenched. Their role becomes less service provider/facilitator and more parasitic.

What’s preventing homeowners from buying and selling to each other directly? Why do we need real estate agents? (I ask as a mid 20s engineer who is probably never going to own a home)

[mooreds]

> Middle men generally have negative impacts on society overall once they become entrenched.

This book covers some very valuable roles middlemen play: https://link.springer.com/book/10.1007/978-1-137-53020-2

> What’s preventing homeowners from buying and selling to each other directly? Why do we need real estate agents?

I wrote about this 8 years ago (was employed as a software engineer at a real estate brokerage at the time):

"I think that there are lots of marketplaces have sprung up via the internet, but as far as I know, the significant ones all offer products that have one of these characteristics:

   * the consumer buys them often [for some definition of often] (airplane tickets)
   * the product is fungible (books, cars)
   * the product is relatively cheap (stuff sold on ebay, amazon)

All of these characteristics lower the risk of purchase. Housing has none of these characteristics. And I don't know how it could, short of a real manufacturing revolution or more houses built out of shipping containers."

https://news.ycombinator.com/item?id=5539026

[AussieWog93]

>What’s preventing homeowners from buying and selling to each other directly? Why do we need real estate agents?

Because a slight miscalculation in value, lack of market insights or poor salesmanship can lead to tens of thousands of dollars left on the table by the seller.

[vsskanth]

Yeah, no. In countries like India you don't use agents to buy or sell property and the free market finds value just fine. That's just one example I'm familiar with and it was pre internet.

[rayrey]

America, home of the parasitic middleman. Let’s talk about title insurance and auto dealers too.

[dredmorbius]

There are benefits and risks to intermediaries.

A chief problem with technically-mediated intermediaries is that rather than buyers and sellers being directly connected, they are connected through yet another, larger-scale intermediary. Amazon, eBay, and Alibaba are three such instances, and each has its own motivations and opportunities to distort markets.

Regulations, preventing the same intermediary from playing both sides of the transaction (in a pass-through mode, apparently, in the flipping case), fiduciary obligations, and of course, reporting, enforcement, penalties, and decertification for violations, are all highly useful steps.

[iaw]

I'm in the market for a house right now and red flags for myself and my agent are houses that were purchased within the prior 2 years to be resold. We just don't touch them. If the market educates itself we can starve the flippers of revenue (not that I'm naive enough to think that will happen)

[AussieWog93]

What you've described sounds like regular old consumerism.

The type of person that buys the flipped property isn't looking for a long term investment or hassle-free life.

What they want is the feeling of getting something shiny and new without spending a fortune on a properly improved building, even if it means tens of thousands of dollars in maintenance cost down the road.

This is something I've learned in the past year or so through e-commerce, and then mapping the behaviours of my customers onto family and friends that I know. A significant portion of the population enjoy spending money on shiny shit, and buying and getting something new is the end goal in and of itself.

The classical understanding that people will spend money to solve a problem after weighing the benefits against the cost only really applies to the population at large when finances are limited.