Buying Flipped Properties and What to Expect
You may have heard about flipped properties watching home make-over shows and reading interior design magazines and saw how amazing it turned out and thought you might find your dream home this way. Before going down that road, what exactly is a flipped house? Flipped properties are houses, typically run-down and needing a lot of work, bought by investors with the intent of doing repairs and updates and selling the house for a higher profit.
Flipped properties are literally books judged by their covers and sometimes not all issues with the property are addressed. Before you go all in and make an offer on one here are a few things to consider.
Hire A Real Estate Agent
In the process of buying a home regardless of whether it’s a flipped property or not hiring the services of a realtor would make the entire process easier for you. In the case of flipped properties, leveraging on their expertise is more critical to know that the flippers are legit, you’re getting a great deal on the house, and not short-changed on any of the work done.
Check Out the Flippers
To get an inkling of the quality of the rebuild and remodels look into the past flips of the investor and the contractors and suppliers they have worked with, check on how the previous projects are doing. You can check out reviews or do a search on the investor and contractor if any red flags come up like lawsuits or complaints. Looking at other property they have done and checking with the owners if they had any issues or had to have any work redone on the house.
Check for Permits
As you do your research look into the permits for the work done on the property. Investor and contractors request permits for the needed work to ensure that all the work is above board and no violations were made in the construction process. Permits are public records and can easily be requested.
Get An Inspector
Inspection is a usual part of any real estate transaction. Even though the house is newly renovated, getting an inspector would help you assess the property and check for any issues in the property. Be thorough, check all the features, ask about the materials and fixtures to ensure that the flippers did not cut corners.
Flipped properties are usually marketed as move-in ready, and can give other buyers the pretense that an inspection is not necessary. Getting the property inspected would help ensure that the declared work on the property was done correctly and the property is priced fairly.
Look Into Property Records
Property Records contain information on the state of the property including its history and all the work that has been done (assuming that there were permits for them). Checking the records and knowing the past issues of the property would also be great information to have to check that during the flip, all necessary work was done to address the issues. Looking in the property records would also show if there are any outstanding fees to be paid like real property taxes.
Ask About Warranty
Ask for warranties for the recent work and appliance upgrades that the investor and contractor did on the property. Ensure that this is in your contract and is transferable just in case you decide to sell the property. Not all flippers would agree to this but it would never hurt to ask.
Be Financially Prepared
It’s best to do your research, especially if you are applying for a loan. Not all lenders go into business with flippers and vice versa. Some lenders would not agree to work with unestablished and unaccredited flippers while some investors are not interested to work with lenders because of the time-consuming appraisals, approval, and releasing that are normal in the house-buying process.
The Bottom Line
If a house looks too good to be true, it probably is. Remember to keep yourself in check and not fall in love with the house before you have done your research. Be skeptical, keep an open mind, and an objective take as you go through the process. Flipped houses make for an attractive purchase and as long as you do your research and the advantages can foreshadow the risks.