IRVINE, CA—In the best US markets for flipping homes, properties were purchased at double-digit discounts below market value, according to a new report from RealtyTrac. The firm found that in the second quarter, on average flippers bough properties for an 8% discount below their estimated market value and resold them at an average 6% premium above their estimated market value.

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

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

Daren Blomquist, VP of RealtyTrac, tells GlobeSt.com, “Traditionally, the flippers' formula has been to buy a property that they can add value to at a discount and sell at a premium. Now, home-price appreciation has slowed dramatically in many of the flipping hot spots, and the availability of discounted distressed properties has dried up. In the best markets for flipping, properties being flipped were all purchased at double-digit discounts below market value, and in most cases sold at a premium above market value. In those areas, distressed bargains are still available primarily because a lengthy judicial foreclosure process has resulted in a lingering foreclosure problem. For example, in Pittsburgh and New Orleans—both in judicial foreclosure states—the median price for a distressed property is under $100,000 far below the national median price for a distressed property of $128,000 so there is room to buy low, add value to the property and then sell it high.”

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

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