Should you buy a flip?
Another phenomena that we credit to HGTV is the increase in the number of flipped homes available for sale. Flips are homes that someone purchases with the intent to renovate and sell, at a profit. In the past, they were few and far between, but now it seems everyone and their cousin is buying and renovating homes or at least considering getting into the business.
Flipped listings can be a sign of a healthy community as flippers are drawn to homes in locations with a strong real estate market. For buyers, it can be very appealing to purchase a home with a brand-new kitchen, updated baths, refinished floors, etc. We don’t advise our buyer clients to avoid flips, but we do suggest they tread carefully and thoughtfully. And we speak from personal experience, as our current home was purchased, renovated top to bottom, and listed by a local contractor.
Here are some bits of advice when considering buying a flipped home:
1. Look beyond the granite counters and subway tile: Most flippers will update the “sexy” stuff - kitchen, baths, a fresh coat of paint are pretty much guaranteed. How old is the roof? Did they update the heating system? Did they cheap out and put carpet over wood floors that would have benefitted from a refinishing?
2. Learn about the contractor: Was the work done by a professional contractor? How many flips has the person completed? While there is a steep learning curve to many home projects, you don’t want your future home to be someone’s first experience tiling or hanging cabinets. Learn what you can about the contractor and their reputation in the community.
3. Ask for the history of the property: When someone flips a home, they generally own the property for a relatively short period of time so a lot of information about the home’s history is lost. Does the basement flood in the spring thaw? Was there ever a buried oil tank on the property? Was the property vacant for a protracted period of time before the renovations? So much information gets lost when the property changes hands.
4.Get copies of all permits: Municipalities have rules regarding which improvements need permits and which don’t. Permits alert government entities of projects (which can impact future taxes), take time to complete and cost money. Some flippers try to by-pass this step.
5. Know how long it’s been owned: This can matter if you are getting FHA financing for your mortgage as FHA has a 90-day flipping rule and won’t approve a loan on any property that is owned fewer than 90 days by the current owner.
6. Assume some corners were cut: It’s a fact of flips - some corners were cut and it’s all about figuring out which ones and how much they matter. Maybe it’s the old roof that they chose not to replace or maybe it’s the chartreuse tile in the hallway bathroom that they hope you think is retro. Hopefully it’s something you can see and not something hidden behind the walls.
7. Assume mid-grade quality finishes: It’s unusual to find a flip with the highest-end cabinets and top of the line replacement windows. Remember, the renovations were completed with an eye to efficiency and value. When our dishwasher broke and the repairman pulled it out, we learned that it had a big dent in the side due to being bought as a scratch and dent and our “new” Sub Zero fridge must have been sitting in some warehouse for years as it was manufactured years before our renovations took place.
8. Expect the unexpected: This is true when buying any home, not just a flip. In our case, the contractor renovating our home added a bathroom on the third floor as part of the project. Unfortunately, his sub-contractor didn’t glue the new drain pipes and this eventually resulted in a costly leak that dripped down to the first floor. causing us to redo our dining room ceiling and tear up tiling in the second floor bathroom.
Flips are likely here to stay and they can be great for buyers looking for a house in move-in condition. But bottom line, investors flip homes to make a profit and it’s important to ask the questions and do the research. For us, our flip has been a great home and we don’t regret buying it but we’d hate for you to have a different experience.