If you are considering buying a house from someone that bought that property solely to make a profit, here a few things to know when dealing with house flippers.
When an area is facing a real estate boom, one of the inevitable consequences is the rise of house flippers. People and groups with the means will move in, purchase houses, hire a contractor to fix it up a bit, and then sell it for a profit. It happens all the time, for better and worse.
Work done by house flippers tends to be hit or miss. Typically, the whole idea is to get the most bang for the buck – meaning the owners will want to spend as little money as possible to get the biggest return on their investment. That means it comes down to the contractors being used, and like any demographic, there are good and bad. And sometimes the contractor hired for offering the lowest bid is not going to be as qualified as the new potential buyer would like.
There are other pressures facing contractors that help to flip houses as well. The people and groups that buy houses with the intention of fixing them up and selling them are also typically looking to get a return on their investment as quickly as possible. They may be planning on having a recently purchased property back on the market within months of purchase, which means that contractors working for the owners are not only facing limited budgets and sometimes unreasonable time frames.
That can often lead to flippers taking short cuts like not addressing an item of deferred maintenance (such as dry rot repair or not installing a new subfloor/underlayment for their new tile floor) – basically anything you can’t see. As long as the owners are confident the house will pass inspection, they are happy to let the new owners figure out what else may need to be done.
Why it Matters
There are numerous issues that could – and should – be addressed once contractors begin work on a house they are remodeling, but time and money often make that impossible. And depending on how much work a house needs, this could lead to serious issues in the future.
Some problems may be relatively minor, like pipes that could stand to be replaced (but aren’t necessarily in immediate need), to larger issues like older wiring that may still function properly, but could also cause a hazard. A house flipper might decide to avoid the additional expense and leave the old wiring in place to protect their immediate profit margin.
While cutting corners is a frequent criticism of contractors that are hired to help flip a house, there are plenty of teams that do things the right way, and are willing to fix and pay for construction defects or items that are no longer up to code. Those costs will often be passed on to the new buyer, but that’s completely fair. The new owners will probably be grateful to pay a little more initially in order to prevent major problems in the future.
Know What You’re Buying
If you have found your dream house and you’re ready to lay down a bid, don’t let the fact that you’re buying it from house flippers scare you off, but go in with your eyes wide open and prepare for a few issues you’ll need to address.
Houses that have been flipped are more prone to construction practices that don’t address all the repairs that should be done. Some might say it’s akin to “putting lipstick on a pig,” which means that the new owners will be forced to deal with them at some point.
If you are buying a house from a flipper, make sure to bring in an inspector you trust – and not just one that is looking for the major stuff, but one that will double check the work the previous contractors did. Some of the issues – like the wiring – will be difficult to see without a great deal of work, but they can check on some of the equally important and more obvious things like what materials have been used. Flippers are often shopping for the least expensive products possible, which could mean your soon-to-be new house is filled with materials from the clearance aisles. Don’t count on a warranty.
What You Can Do
The best way to protect yourself when purchasing a new property is to inquire about the history of the house. It’s easy to spot whether or not a house has been flipped, just look at the dates of sale. Your realtor should be able to obtain these easily, but you can also find them online in most cases.
If the house has been flipped, pay very close attention to the inspection report to see what work has been done recently, then take it a step further. Like taking a car you’re purchasing to a mechanic, have a contractor of your choosing that you know and trust take a close look at the property and conduct their own inspection.
You should also insist on seeing the inspection slips. Even if the repairs didn’t require a building permit, in most states all trade professionals (electrician, plumber, mechanical) need to be permitted and inspected – even small repairs like swapping a toilet or a light fixture. If no permits were issued and yet you can see that the work was done, you know something is fishy.
Seek Help
If you find a house you love, don’t let the shadow of a house flipper scare you off, but prepare yourself for the possibility that you may have to redo some of the work that was just done, or have a contractor go further than the previous team was willing to go. The team you are buying the house from is more concerned with making a profit than ensuring your comfort, so be prepared.
If you are looking at buying a home and need a little help, contact Fleschner Construction. Our skilled team of professionals can offer advice and help you prepare for years to come in your new potential home. And ultimately you should just remember the old adage: “Buyer Beware!”