Flipping. It’s not just something you do to pancakes.

This weekend the Seattle Times had an article on condo flipping, Tactics in place to deter buyers from flipping and it more or less paints a rosy picture of the situation here in Seattle. The Cosmo Blog has a follow-up blog post titled condo arbitrage.

Flipping%20pancakes Flipping. Its not just something you do to pancakes.

This article and topic really deserve a length post but I’ve already spent too much time in Excel today so here’s the quick late night version….

We all know no one’s flipping here right? We have investor caps and the sales people are ‘trained’ to spot the flippers. However, we all know that the re-sales at 2200 and Cosmo the two largest projects to complete this year keep climbing. So how are the flippers doing?

Cosmo has 40 units on the MLS. They’ve sold 15 units since 01/01/2007. Of those 15 units only 3 were not sold by the developer.

2200 was sold out and has 36 units on the MLS. Flippers are doing much better here having sold 15 units since the beginning of the year.

However, it does sound like developers are learning their lesson. Perhaps their best chances lies in the contract addendum mentioned in the article since I’m skeptical of flipper spotting and investor caps:

Williams says she may recommend affixing an addendum to sales contracts stipulating that investors must return their entire profit on a home’s sale if it takes place within a short-term time window, determined by the builder.

I believe Gallery, Brix and Veer all have some sort of addendum in place to encourage 100% owner occupancy (or 100% occupancy by non-investors.) Do folks know of others? It’d be great to pull a list together and compare their terms.

About Matt

Matt , Urbnlivn's publisher, has a love for lofts, floating homes and mid-century moderns.

For years Matt resisted becoming a real estate agent preferring to be an executive in the startup world but he recently caved in the spring of 2014 and became an agent.

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  • Dan

    I think the 2200 and Cosmo are the examples that come readily to mind because they are the two largest projects to be completed in the last year. They also attracted lots of investors due to the timing of the presales (early 2005) – seeking the kind of profits seen at the Cristalla.

    IMO, the next set of projects will fare some order of magnitude worse in the flip arena. I can’t help but envision hat the success at those earlier projects (Cristalla, 2200, Cosmo) caused dollars signs to rule the day at developer offices all over Seattle. To make things worse, the projects coming online in the next 18 months seem to tack on even more of the excess/condo life/opulence (read: expensive).

    Somehow I think these upcoming projects will make the kind of flip numbers we’re seeing today pale in comparison. “Holding costs” for a unit at the 1521? OUCH.

    500k condos are one thing, but I just don’t see a whole lot of >1.x mil condos moving very quickly in this marketplace.

  • Dan

    I think the 2200 and Cosmo are the examples that come readily to mind because they are the two largest projects to be completed in the last year. They also attracted lots of investors due to the timing of the presales (early 2005) – seeking the kind of profits seen at the Cristalla.

    IMO, the next set of projects will fare some order of magnitude worse in the flip arena. I can’t help but envision hat the success at those earlier projects (Cristalla, 2200, Cosmo) caused dollars signs to rule the day at developer offices all over Seattle. To make things worse, the projects coming online in the next 18 months seem to tack on even more of the excess/condo life/opulence (read: expensive).

    Somehow I think these upcoming projects will make the kind of flip numbers we’re seeing today pale in comparison. “Holding costs” for a unit at the 1521? OUCH.

    500k condos are one thing, but I just don’t see a whole lot of >1.x mil condos moving very quickly in this marketplace.

  • PhilW

    Are restrictions on a owner’s ability to sell, even legal? The HOA might be able to restrict, but somehow I don’t see how the builder can claim rights after a sale has closed.

  • PhilW

    Are restrictions on a owner’s ability to sell, even legal? The HOA might be able to restrict, but somehow I don’t see how the builder can claim rights after a sale has closed.

  • jo

    what a bunch of crap:

    “David Thyer, president of R.C. Hedreen Co., developer of the Olive 8 condominium complex, says he gave sales representatives he’s hired from Williams Marketing a goal: Cap the number of units sold to investors within the 231-unit building at 5 percent.”

    Investor rate at Olive8 limited to 5%? HAHAAHAAAHAHAHA. We’re going to see a lot of flips when that building comes to close. When I signed at Olive8, I don’t remember any kind of weeding out to determine whether one was a flipper or not. The only thing I can think of was a checkbox on a questionnaire.

    Do they actually think that out of the entire building (231 units), there’s only going to be 12 flips with nothing in the PSA (at least when I signed) about penalities if one did?

    Don’t treat us like gullible idiots.

  • jo

    what a bunch of crap:

    “David Thyer, president of R.C. Hedreen Co., developer of the Olive 8 condominium complex, says he gave sales representatives he’s hired from Williams Marketing a goal: Cap the number of units sold to investors within the 231-unit building at 5 percent.”

    Investor rate at Olive8 limited to 5%? HAHAAHAAAHAHAHA. We’re going to see a lot of flips when that building comes to close. When I signed at Olive8, I don’t remember any kind of weeding out to determine whether one was a flipper or not. The only thing I can think of was a checkbox on a questionnaire.

    Do they actually think that out of the entire building (231 units), there’s only going to be 12 flips with nothing in the PSA (at least when I signed) about penalities if one did?

    Don’t treat us like gullible idiots.

  • EconE

    my check this evening shows 41 MLS listings for the cosmo and 2 FSBO listings. Of the 43 units for sale 4 units are also for rent one of which is the FSBO studio. Rental units that are not listed for sale stands at 16-18 (MLS/SR/CL) but hard to tell exactly.

    One strange thing I noticed.

    2200 Westlake #W403 was last entered on 2/23 with 3 reductions down that had brought the asking price down to $450k. Condo Compare shows a $452k sold price for a 4/12/07 sale. Seems odd that it would go for more than asking after 3 reductions.

    which large project is the next to watch? Lumen?…Parc? …QAHS?

  • EconE

    my check this evening shows 41 MLS listings for the cosmo and 2 FSBO listings. Of the 43 units for sale 4 units are also for rent one of which is the FSBO studio. Rental units that are not listed for sale stands at 16-18 (MLS/SR/CL) but hard to tell exactly.

    One strange thing I noticed.

    2200 Westlake #W403 was last entered on 2/23 with 3 reductions down that had brought the asking price down to $450k. Condo Compare shows a $452k sold price for a 4/12/07 sale. Seems odd that it would go for more than asking after 3 reductions.

    which large project is the next to watch? Lumen?…Parc? …QAHS?

  • Ben K

    “Seems odd that it would go for more than asking after 3 reductions.”

    They likely rolled closing cost into the price.

  • Ben K

    “Seems odd that it would go for more than asking after 3 reductions.”

    They likely rolled closing cost into the price.

  • Judeo

    “Seems odd that it would go for more than asking after 3 reductions.

    They likely rolled closing cost into the price. ”

    or gave the buyer back 30k cash-out heloc with a “true price of 420k. on top of it, the buyer probably has no down payment, a 1 year arm and no doc’s to confirm that they’ll actually make the payment.

    And I’m not sure of the name of the apartments, but it’s on the northwest corner of pine and bellevue and they’re converting to condos. Now, this building is in such shape that it has absolutely no business adding to the already glutted condo inventory, yet for some reason, the owner is going through with the conversion. Anyone know of the owner of that building and why, with all of the indicators out there, they’re converting NOW???

  • Judeo

    ““Seems odd that it would go for more than asking after 3 reductions.”

    They likely rolled closing cost into the price. ”

    or gave the buyer back 30k cash-out heloc with a “true price of 420k. on top of it, the buyer probably has no down payment, a 1 year arm and no doc’s to confirm that they’ll actually make the payment.

    And I’m not sure of the name of the apartments, but it’s on the northwest corner of pine and bellevue and they’re converting to condos. Now, this building is in such shape that it has absolutely no business adding to the already glutted condo inventory, yet for some reason, the owner is going through with the conversion. Anyone know of the owner of that building and why, with all of the indicators out there, they’re converting NOW???

  • EconE

    Matt Goyer stated…

    “Of those 15 units only 3 were not sold by the developer”

    interesting…how is the developer able to sell but not the resellers. The resellers are professionally represented for the most part.

    It makes me question Owens Reply on the CosmoSeattle blog…who does Owen Represent?

    Speaking for myself…seeing how things seem to be running (regardless of the project) If I had a 5% deposit down on a building and hadn’t closed yet…I’d eat the 5% and let the developer have his condo back.

    If I were an owner/resident, I personally wouldn’t close…just my opinion.

  • EconE

    Matt Goyer stated…

    “Of those 15 units only 3 were not sold by the developer”

    interesting…how is the developer able to sell but not the resellers. The resellers are professionally represented for the most part.

    It makes me question Owens Reply on the CosmoSeattle blog…who does Owen Represent?

    Speaking for myself…seeing how things seem to be running (regardless of the project) If I had a 5% deposit down on a building and hadn’t closed yet…I’d eat the 5% and let the developer have his condo back.

    If I were an owner/resident, I personally wouldn’t close…just my opinion.