Flippin' in Lake Forest

Thanks to reader EE for pointing this one out. Did you think real estate OC real estate flipping was dead in late 2008? Nope! Here's a former REO in Lake Forest that has been majorly upgraded and is now back on the market at a healthy premium.

24242 Palmek Cir, 92630
Asking price: $499,000
Asking price/ sq ft: $416
Purchase price: $331,500
Purchase date: 10/3/08
Size: 3 beds, 1.75 baths, 1,200 sq ft (built in 1965)
MLS: S557507 (19 days on Redfin)
ZipRealty price tracker: Price Reduced: 1/07/09 -- $525,000 to $499,000
Zillow Zestimate: $422,500
Type: Single Family Residence
Style: Ranch
Stories: 1
Lot size: 7,434 Sq. Ft.
From listing: New, New, New! This home has been totally remodeled from the inside out. $100,000 in upgrades. Everything has been done first-rate. Granite slab counters in kitchen and baths, travertine floors in kitchen, hall and baths. Travertine master bath and guest bath. All brand new stainless appliances including custom counter-depth fridg. maple cabinets, center island with eating counter. All new fixtures - new sinks, faucets, shower valves, toilets, bath tub, etc. All new designer lighting and ceiling fans. Frameless glass shower doors. Travertine fireplace with wood mantle. All new raised panel interior doors, mirrored closets. All double pane windows and doors and a brand new front door. All new paint inside an out. Large flat back yard surrounded with trees for privacy. Large driveway on semi-cul-de-sac street. Walk to the new Arbor Shopping area, Starbucks, Banking, etc. Elementary school earned the 2004 National Blue Ribbon. This home is truly move-in ready.


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Our source summed this situation up perfectly: "They did a fine job, but a markup of $192k in this market? In that neighborhood? Best of luck to them."

Granite, stainless steel and travertine kitchen...check! The house does looks good. The singular question is: Does someone want to pay half a million dollars for 1,200 square feet in this part of Lake Forest?

The $414 per square foot asking price - in this neighborhood - is laughable. Nearby properties are asking between $365,000 for a slightly smaller property and $450,000, though the majority are in the mid to high $300,000s. There is an issue of whether this home is simply priced too high and too upgraded compared to other houses in the neighborhood. We tend to think yes.

We have to admit, we're very interested with the decorating approach. Christmas decorations outside, an un-ornamented tree in the middle of the floor inside but not really much furniture. Patio furniture outside, but a blank bedroom inside. There was an attempt to bring some level of personality, but it was still blatantly obvious that nobody lives there.

Coincidentally, 24141 Palmek Circle is listed on ForeclosureRadar as an REO. That property sold for $480,000 in 2004. By the time those owners left, they rung up $600,000 worth of loans.

Our subject property has just been reduced for the first time, so we're wondering if there hasn't been as much action as the owner would like. If we assume the description is spot on and the flipper spent exactly $100,000 on upgrades, we could estimate their expenses of buying and rehabbing the property to be $431,500 (not including any interest on mortgage payments, but for simplicity we'll assume they paid cash so there is no mortgage).

If they can find a buyer able and willing to take this home for the current asking price, they would be in for a nice payday. If we include 6% sales costs, the profit would be $37,560. Nowhere near a bubble-era flipping windfall, but we would consider it a nice feat given the current real estate market, economy and choice of property. Then again, we're doubtful a sale is coming any time soon. Stay tuned...