A Little Advice When Considering a “Flipped” Property Purchase
I see a good deal of housing inventory every week. Many of these homes were recently remodeled—and a good deal of those, “investor-flips.”
Improvements to flipped properties can vary dramatically, from a simple primping (paint, carpet, general updating and some landscaping work), to complete renovation.
On the surface a flipped properties look “new.” Fresh paint, refurbished flooring, new or resurfaced cabinets, updated baths and kitchens with the latest contemporary finishes can have a great deal of sex appeal. What buyers must try to discover, is what may lurk below that attractive surface.
Before I continue, please know there are many quality renovations/flips that are completed by skilled business people who employ knowledgeable and experienced tradesmen. I have a great deal of respect for the men and women in this business who take pride in their work. Many of these homes went from being the “dog” of the neighborhood to becoming the prettiest home on the block and a boost to the neighborhood!
On the other extreme, however, I’ve attended many home inspections where the inspector has discovered botched repairs to plumbing, electrical, roofing, flooring and more that could cost an unsuspecting buyer thousands of dollars to correct —often much more than it would have cost to do it properly, with permits, the first time.
Check out this example:
Despite having expressed my verbal reservations after noticing multiple defects that I considered warning signs about the quality of the repair/renovation work in a flipped home, my clients submitted an offer which was accepted. As the inspector was performing his inspection, I did my own visual inspection and I discovered a long crack in the freshly plastered and painted wall at the seam behind the door.
When the inspector crawled under the house, he discovered that two sides of the foundation wall were missing! In its place, heavy cardboard had been installed around the foundation area and then the exterior of the home (including the cardboard) had a new coat of stucco applied! Estimated cost to repair the foundation issues: $30,000. Yes, there were other issues with this “remodeled” home as well, but I think that’s enough to make my point.
When previewing a flipped home, here are some things to do and questions to ask:
Pay attention to details! Sloppy finish work should put you on alert.
What is the quality of the materials used in the renovation? Are they likely to withstand usual wear and tear for a reasonable period of time?
Assuming you go under contract on the property, hire an experienced and well-qualified home general home inspector and have your inspection as soon as possible.
Ask for a detailed accounting of the work completed by the seller and request invoices and warranties that may apply.
Consider additional inspections for any “suspect” areas of the home pointed out by the home inspector (or any you may have reservations about yourself) such as roof, plumbing, electrical, HVAC, foundation, property lines, etc.
Take time to talk to the neighbors. They can be a good source of information about the condition of the home prior to the renovation and may share observations that might be helpful.
Ask the seller about their previous experience with home renovations. How many have homes they successfully flipped? Who did they use for the repairs?
Does your Realtor have reservations about the property? Ask them why.
How was the property acquired? Did the current owner receive information and disclosures when they purchased the property? If so, request all documentation. You have a right to see it.
If the property was acquired at auction, ask your Realtor to explain the possible risks associated with the chain of title for a foreclosure. Homes bought at auction are generally without warranty or any guarantee of clear title.
In closing, there’s nothing wrong with purchasing a home simply because it has been flipped. However, just because it looks great doesn’t mean there should be any less due diligence. In fact, since signs of problems may have been recently concealed in the renovation, perhaps special care should be taken to assure that the beauty of your new home is not just skin-deep.