IRVINE, CA—In the best US markets for flippinghomes, properties were purchased at double-digit discounts belowmarket value, according to a new report fromRealtyTrac. The firm found that in the secondquarter, on average flippers bough properties for an 8% discountbelow their estimated market value and resold them at an average 6%premium above their estimated market value.

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In most cases, in the best markets for flipping, properties weresold at a premium above market value. One exception wasChattanooga, TN, where flippers sold the flipped properties at adiscount, but they still made a hefty profit on average because thediscount they purchased at was so much more than the discount forwhich they sold.

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Interestingly, home price appreciation helped out the flippersin almost all of the best markets as well as the worst markets.However, the difference is that in the best markets, the flipperswere more successfully able to buy below market value and alsoevidently add value, therefore selling at a significant premium inmost cases.

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Daren Blomquist, VP of RealtyTrac, tellsGlobeSt.com, “Traditionally, the flippers' formula has been to buya property that they can add value to at a discount and sell at apremium. Now, home-price appreciation has slowed dramatically inmany of the flipping hot spots, and the availability of discounteddistressed properties has dried up. In the bestmarkets for flipping, properties being flipped were all purchasedat double-digit discounts below market value, and in most casessold at a premium above market value. In those areas, distressedbargains are still available primarily because a lengthy judicialforeclosure process has resulted in a lingering foreclosureproblem. For example, in Pittsburgh and New Orleans—both injudicial foreclosure states—the median price for adistressed property is under $100,000 far below the national medianprice for a distressed property of $128,000 so there is room to buylow, add value to the property and then sell it high.”

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To view RealtyTrac's heat map on the ROI of flipping, clickhere.

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As GlobeSt.com reported in August, flipping of USresidential properties dropped below 5% of allsales in the second quarter, according to a report from RealtyTrac. Nearly 31,000single-family homes were flipped nationwide during the quarter,representing 4.6% of all US single-family home sales, which is downfrom 5.9% in the first quarter and down from 6.2% in the secondquarter of 2013, the firm reported.

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Carrie Rossenfeld

Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.