A couple weeks ago I watched two reality shows about buying, fixing up, and selling homes for a quick profit. The first show is a couple years old, aptly called Flip This House. The latecomer to the game on another network is a the same concept with a me-too name: Flip That House. I put the power of Tivo to work and recorded both of the shows.

My house was actually in the final steps of selling, so I decided to watch these shows with a new found knowledge of my own real estate ordeals. Plus, these shows were filmed in the heat of the housing market, and I was interested in the time capsule of emotion and circumstances of the investors.

I would not have had the fortitude to watch a show like that at any point over the last 9 months because there was nobody buying my very pretty house. Watching the show would’ve made me feel foolish, jealous, or mocked by the “profits” that splash across the screen with every upgrade to the home. But I’ve been on a couple reality shows myself, so I know that the creators of the show are selling entertainment, not facts. Things were edited in and out of my life and millions was believed as historical fact. So what I’m about to write isn’t because I’m taking these shows as 30-minute seminars on becoming a millionaire. I’m just comparing my own reality to that of a TV show. With that disclaimer out of the way…

Flip THIS House

This show was interesting to me because it is filmed in Atlanta, a city I lived in and loved for 4 years of college. I watched the housing market there do amazing things after the 1996 Olympics from my dorm window. Plus, the show followed business partners that were livin’ the ATL rapper lifestyle, albeit a more tame, Real Estate version of bling. They had my full attention.

The first thing that made me doubt the authenticity of this show was how little they had to pay these contractors to do work. If the price tag on the screen were real, it’s obvious these workers were more interested in being on TV than getting paid what they are worth. I know this because I could’ve had many “girlfriends” when I was on the Real World and looked like quite the player, but I knew those girls were just gold diggers looking for the spotlight. I also know this because nobody puts all new drywall in a house for a mere $600.

Some of the other workers’ pay was suspicious too. The 3 “day laborers” were paid $200 total for a full day of cleaning up the huge, overgrown front yard. In my neighborhood, 1 migrant workers charges $200 for a day’s worth of yard work. And that’s your basic dude with hand trimmers and a saw. All in all, this house was entirely remodeled for $12,000 which just seems impossible to me. New roof, walls, fixtures, the yard? No way. A roofer recently wanted $500 to do 2 hours worth of work that I thought could be done in 45 minutes.

The first part of the dollar equation makes me suspicious, but I’m just ask skeptical about how the creators of the show calculate the “added value” they splash across the screen with every upgrade. Some things are easy to calculate because home appraisers do it all the time, like granite counter tops. Those are standard luxury items in a home and they know how to price them. But they’re quoting “added value” over things like new paint over the exterior bricks, and it doesn’t even look that pretty. So where’s the value there? And what happens when your bargain labor installs the cheap carpet poorly. No appraiser will factor that as an upgrade, but the TV show always does.

But what I was most disappointed in was how the president of the investment company was cheap. He nickeled and dimed everyone at every step of the way. I understand that you have to watch your money, but you also can’t take advantage of people for your own gain. I’ve dealt with some greedy bastards, and when you are on the other end of one of their “deals”, you know the full story. They act like they’re trying to protect their money from being stolen, but in reality, they’re stealing from everyone else.

Of course I know that the creators of these shows need drama, and sometimes your only adversary is that you are running out of time and money. In reality, when construction is running smoothly and there are no termites hidden in the attic, life is pretty good. It’s the kind of thing you see on American Chopper. They don’t have any real “deadlines.” Nobody is going to cancel their order because the bike wasn’t done in time. They probably already have paid for half of it anyway. But episode after episode is about the bike builders “battling against the clock.”

But if his greed is a reality and not a TV fabrication, there could be greater problems beneath the surface. A greedy real estate investor can forget that there are real people who are buying your homes. They forget that this home is their dream where their family will grow. They’ve worked hard and saved money for this very moment when they get to buy a home. To date, I’ve only seen one episode (last year) where an investor actually had to do structural changes to the home to make it more safe. Every other episode has been the story of an investor making cosmetic changes. I understand that not every house has a villain that needs to be defeated before the investor can sell the home on a clean conscience. And a buyer shouldn’t be so swayed by a pretty surface that they forget to look deep into the home. But a greed is greed, and someone will always suffer at the expense of your greed.

Flip THAT House

The second story was a young lady from LA who did not seem too bright at all. She had no confidence or style. Rather blah. I’m not judging her for the sake of being critical, but she didn’t seem to have what it took to navigate a tough, competitive market. At least the other dude had some charisma on his side which made you believe that not everyone could do the same job.

She bought homes in the LA area, put in new counter tops, moved some walls, rolled new paint, and replaced the yard–your standard fixer-upper to-do list. At the beginning of the episode, she moaned about having to pay $500 to a landscaper to move the sprinklers away from the sidewalk. She looked into the camera and explained that, “set backs like this can make a project tough.” It seemed like a small loss to get all worked up over, considering I had about 20 of those setbacks. But we’ve both been there, so I felt bad for her. But that pity disappeared when she ended up selling the house 6 months later for a profit of $250,000. Yes, she was upset about $500, and ended up making a quarter million.

I don’t have time to consider the quality of work she did on the home and all of that. But I do want to talk about that the TV calculator of profit is that it never factors in real dollars that you have to spend when you sell a house. First you have to pay the buyer’s Realtor 3%, which in the case of the LA house works out to be $27,000. If you are using a Realtor to represent yourself, that figure doubles to $54,000. That’s 1/5th of the profit made off the home already gone. In the negotiations, you can might end up paying the buyer’s closing costs, which can be $5000.

Another reality is the property taxes she had to pay out over that 6 month period, which I would’ve been at least $6000 in California. Then you have to add in costs of electricity, water, the security system, and landscaping fees every month. That’s another $2000 over 6 months. Once the home is in escrow, the buyer is obligated to fix up outstanding problems with the house, like leaky faucets, masonry cracks, and ill-fitted doors. Now in a good market like she was in, most buyers ignore that stuff because they’re happy to be homeowners and don’t want them to sell the house to someone else. But those little things can quickly add up to a few thousand dollars in repairs. So now that $250,000 is down to a less than $180,000. And then you have taxes to pay on that $180,000 because you never lived in the home as a primary residence and you have no loop holes. I don’t know what that would be, but I wouldn’t be surprised if it knocked off another $20,000.

That’s still a lot of money, don’t get me wrong. With or without a TV calculator doing your math, you’re gonna make money. And that’s what this lady did. In the closing credits, she stood confidently in her own grand home and shared that it was a “lucrative endeavor.” At the same time, I was both jealous of her fortune, but prophetic with my fast-forward knowledge that this would be the last time she’d mention “lucrative” in this decade. Who knows, maybe I’m wrong. We still have 3 years left before the decade runs out. Maybe there will be a blogger mocking me with the same hindsight from the year 2010.

As for the future of these two shows? They certainly aren’t going to air any shows filmed in 2006. It would look much like my own life. A nice house sitting on a nice street. A for sale sign out front and nobody knocking on the door.