House 'flipping' is not always bad

Flippin' houses!

No, I'm not upset about my home's latest malfunction. Rather, readers keep sending e-mail and posting comments online about people who were "flipping" houses during the real estate bubble in an attempt to make big money.

A few weeks ago, I introduced you to a reader named Aaron, who was angry with the flippers, complaining that they looked at their homes as investments instead of living spaces. He wrote that he liked to hear stories of people who were hurt when the bubble burst and their greed caught up with them. "I hope ALL of them end up penniless, starving and living under an overpass," he wrote.

Aaron was responding indirectly to a question posed by Shirley, who was the topic of an earlier column on reverse mortgages. Now Shirley has responded to Aaron through an online comment.

"I know the e-mailer Greg wrote about wasn't really talking about my situation, but I have to agree that some lenders were greedy," Shirley wrote. "My daughter's friend and her husband bought a home about 10 years ago, and they have a very limited income. When the lender told them that they could buy a big expensive home, they said 'No.' They instead bought a smaller, older home in an inexpensive location because they knew they could never pay back what the lenders wanted to give them.

"Too bad so many other people were either greedy or taken in by the lenders who told them everything would be OK."

Kelley, another online reader, also blamed lenders for many of the bubble problems.

"Lenders were loaning upwards of 103 percent of the value with no down payment," Kelley wrote. "Then they were adding all types of contract fees, so really they were even financing all the extras, also. So a home of, say, $100,000 would have a loan balance of $125,000."

That may not seem like a lot on one loan, Kelley wrote, but lenders made thousands of loans to people on "stated income, which means I tell you what my salary is and you take it at my word. And these people never figured in the cost of homeownership, such as upkeep, repairs, taxes, homeowners' insurance — these were all after the fact.

"So don't say it is the people selling or flipping houses, because that is as far from the truth as it gets. Do you know how important this job is to remodel older houses to keep communities occupied? I have personally taken eyesores in a city and changed the area by reviving some of them."

I did not mention the positive impact of some "flippers" in my original column, and it warrants consideration. I received an e-mail from a reader named Bruce who agreed.