Property flipping — where people invest in buying a home only to fix up problems and quickly resell at a profit — is a healthy business practice, but one that is open to potential for abuse.
Many flippers attempt to push properties that they haven’t done much work on. Often, they consider it adequate to slap on a coat of paint in a few easy-to-notice places, add a new refrigerator and stove to the kitchen, polish the floors, and sell on an inflated price. In many cases, flippers work actively to hide problems under attractive cosmetic touches.
If you’re buying a home, then, you need to be especially careful when you look at buying a flipped house. To do this, though, you would first need to know how to tell a flipped unit apart from a regular one.
Things to Consider When Buying a Flipped House
Try to investigate the sellers
You can tell if home is a flip by checking with the Land Registry for its sale history. If it sold only a few months ago and is now on the market again, it’s probably being flipped.
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You can look up information about the person who holds the property now and look up what other properties they may have flipped. If you speak to those buyers about their satisfaction level with their purchase, you’ll know how trustworthy the flipper is when you are buying a flipped house.
Make sure that all work was properly done
A home inspection by a qualified inspector is especially important for properties that have been flipped. Since flippers are not necessarily emotionally invested in their property, they will often attempt to get away with poor quality work.
It is important to bring a licensed, insured and accredited inspector in to look for problems, and recommend courses of action. Should the inspector uncover problems of a serious nature, you need to ask the seller for a fix, or for a discount on the asking price of the house to pay for the repairs.
Ask to see those permits
Some flippers will save to buy a home, do all the fixing up necessary with their own two hands to save on costs. While there’s nothing necessarily wrong with DIY, you need to make sure that it’s up to code.
One way to do this is to ask to see permits for everything. If there is no permit, chances are that the work isn’t up to scratch. There is also a slight chance that the authorities will come by one day and order that everything be torn down for code violations.
It’s also easy to check for DIY work by looking closely for workmanship quality. Areas where areas of new work abut on old work, if poorly done, can provide clues.
Being careful with the stipend
In many cases, home flippers will not hide the fact that they are in the flipping business. They will go so far as to leave a few parts of the remodeling process undone on purpose to allow the buyers, whoever they may be, the freedom to choose colors, materials, and textures as they want. They will usually hand the buyers a cash stipend to take care of these expenses.
Usually, buyers tend to be wowed by stipends, and tend to quickly accept. It’s important to make sure that the stipend does cover quality stuff for whatever has been left undone. Many flippers will try to take advantage of the situation by offering tiny stipends to cover large areas left unfinished.
Make sure that you are quoted a fair price
To actually know if you’re getting a good deal on a property, you need to research similar properties in the immediate neighborhood. Prices stated on Internet listings are usually inaccurate. It usually takes an experienced local agent to actually tell you what the value might be (visit Gascoigne-Pees for more for more information).
It is actually a good idea to trade with care, no matter what kind of property you are buying, new or old, flipped or otherwise. If you know that a property is flipped, though, you might find inspiration to truly look. It’s important; buying a property with problems that have been masked over can be an expensive mistake to recover from.
Buying a flipped house may make sense if you’re looking to buy a second home. Buying a flipped house can be a good investment if your looking to buy an additional house.
Rodney Kay is a private property landlord and investor. He enjoys the opportunity of imparting his ideas and insights online and writes for a a variety of relevant websites.