Of course it is possible, but there are not a lot of those deals floating around. The under-market flip depends on an unsophisticated seller who has no real estate agent or a poorly informed agent. The seller must have no idea regarding the true market value of the property, and you must get to him or her before all the other 8,000 bargain hunters looking for the same type of deal as you.
That being said, sometimes you just stumble upon those opportunities. I recently worked with a client who wanted some raw land on which to build a small retail development. I found a house and three acres of land in an area of rapid growth. As far as normal house values go, the seller’s agent recommended a pretty high price of $653,000 for a modest 40-year-old ranch home with three bedrooms, one bathroom, and three acres of land. In any other part of town, that would be a $160,000 property, tops. With 43,560 square feet in an acre, and three acres of land (counting the house as worthless), the asking price worked out to $5 a square foot for the land. The seller’s agent thought she was asking for the moon, but could get the price in such a hot market.
What I knew was that land was selling for $10 a square foot, only 1,000 feet down the road. If I were not working with a buyer client who needed just exactly that size property in that location, I could have bought it myself and flipped it. Even if I offered full price and agreed to pay all closing costs, I could have bought that property for around $660,000 and sold it the same day for $1.3 million. A house mover was willing to take the house away, at no expense to my client. I did not feel guilty about my client buying the property so cheaply because the seller and her agent set the price themselves. If they were happy with that sum, it was not my job to educate them that they could have gotten more.
Under-market flippers need to be very in tune with their market place and the range of prices for properties. They have to be good at networking to learn about new properties just coming on the market or about to be offered for sale. That is because the under-market flipper needs to be the first one to make an offer on the property, before everyone else learns about the bargain basement price. Finally, this type of flipper has to be good at making quick decisions. In this market, he or she who hesitates will lose the deal to someone faster.