These days, a large portion of single-family homes are being flipped, that is, the homes are bought, renovated, and resold quickly. In recent years, it has become harder for flippers to finance these investment properties, and properties are often bought with cash or hard money loans. However, many markets are in need of housing inventory and so those that can amass the funds to flip a property can make money in the process.
Prospective homebuyers should always have an eye out unprofessional looking renovation work and defect cover-ups. However, when the entire property has been flipped, it may be harder to tell where the investor cut corners while prepping the home for sale. “A lot of these guys who buy these homes to remodel and flip them do a good job,” said Bill Jacques, president of the American Society of Home Inspectors. But, “there’s always going to be the person to put lipstick on a pig and sell it. They try to honey up these houses and paint them, put some new light fixtures in and make people think they’re in new and good shape.”
How do you make sure you don’t buy a home that has been renovated cosmetically, with serious underlying issues beneath the fresh paint? Below are some tips.
- Find out who did the work. Make sure the person or company who did the renovations has a good reputation. The real estate listing may not name the flipper, so you may have to go to the county assessor’s office to find out who last had the deed on the house. Once you have that, you can start researching to see if it’s a reputable business. You may want to steer clear of novices. Larger investment groups can afford to spend the money to do it correctly. Smaller investors are on a tight budget, and when they find a problem, some of them will do everything they can to spend as little as necessary.
- Hire a home inspector. At Parkwood Property Inspections, we can spot some of the common shortcuts that flippers tend to take when revamping a home on the cheap. Many of the homes that are being flipped are in some state of disrepair when they were acquired, and the amount of money it would take to make the house right can exceed the appraisal value. Experienced flippers make better choices, but novices sometimes get in a financial bind and begin covering up items, rather than repair them. Novices will sometimes put new shingles on the roof, but won’t repair the roof decking. They’ll sometimes paint and caulk wood trim instead of replacing it. And while home inspectors can’t look through walls, we can test systems and form a professional opinion on the quality of the work performed.
- Look for structural problems. At Parkwood, this will be part of your home inspection, but it deserves a section of its own. Repairing a home’s foundation can cost thousands of dollars, and so if we find extensive issues, we may refer you to a structural engineer or a general contractor for repair plans and estimates. It is important to know the extent of what you are buying before you complete the purchase. Due to the cost associated with making these repairs, many times house flippers cover up structural problems rather than repair them.
- Check the permits. If you suspect major structural work was done on the home, go to the local building department and make sure that permits were pulled and closed out properly, with inspections done at completion. If bathrooms or kitchens were rearranged or moved, you’ll be able to tell from the paperwork what plumbers and electricians were used for the job and can check whether they are licensed professionals. If interior walls were removed, work should have been done under a structural engineer.
Property Investors that do a good job add value to the marketplace. If you are lucky to come across one of these properties, you’re likely to be happy in your home for a long time.