Be Wary of Flips

A few years ago, this may not have been a problem. But now, as time matures, and the once real estate boom is behind us, we are seeing lot of those "flips" hit the market again. This time, however, they are all repaired, rehabbed and staged... just like you would expect to see on HGTV or TLC.

The problem is that those late night TV shows and infomercials didn't teach everything there was to know about how to fix a flip. Yea... we know what kind of spanish tile to install, and we know how to get a good deal on marble floors or granite counters. We also know how to maximize the space we have so the entire home flows.

But what we do not know is the most important thing: And that is... how in the heck do you fix up a house. I don't mean cosmetically! I mean structurally and functionally. It's like going into battle with an instruction manual and no real combat training (huh??)

I am on my high horse right now because I have seen several supposed flips lately that look beautiful on the outside, but on the inside... it is a different story. I just closed on a home in North Raleigh with a wonderful couple from out of town. When we looked at the home, it was beautiful! Granite counters, hardwood floors, antique fixtures, stainless steel appliances and the whole nine yards. But when we got around to inspections, the home showed a lot of flaws. The Sellers was very agreeable in fixing things, but during the month we had the property under contract, they didn't fix a thing. That should have been our red flag. Instead, we settled for a couple grand as a seller concession and my Buyers closed on the home. Since then, they have had nothing but issues. Leaking faucets, plumbing mains leaking everywhere, improperly installed flooring, counters and appliances... you name it! You just never know what is underneath all those band aids.

Another couple that I worked with recently put a home under contract. Same thing... beautiful on the outside, but on the inside??? The inspection once again showed a lot of deficiencies and structural defects that were simply not completed correctly. How about mold?? Don't play around with mold.

Many of these nine-to-fivers who buy run-down homes at low prices with every wonderful intention of fixing up a home simply fail to succeed. They start with all the gusto in the world. But when the process takes months longer than they had expected, certain items tend to get lost and corners are cut. In addition, budgets are always under valuated, so as the prices go up and the cost to fix increases, more corners are cut. Of course, this is not the case with every contractor, rehabber and flipper - like I said, I am on my high horse right now after seeing some of my buyers very distraught.

It is so easy to look at water stains on a wall and just figure you can paint over them. If something doesn't leak right now, there will never be leaks, right? Do many flippers know how to correctly install a dishwasher using the high loop method? Do many flippers really know how to install a GFCI breaker? How about properly istalling the discharge valve on a hot water heater?

My point is that it can be so easy to put a cosmetic band-aid on a flip. The band-aid makes the house look, feel and smell wonderful to potential Buyers. But what lies underneath those bandaids? Part of the problem is lack of funds. Part of the problem is lack of knowledge. Part of the problem is a flipper's ability to simply overlook what isn't a problem now, but will be a problem doen the road. Some of those red flags simply go unattended.

If you are contemplating purchasing a home that is 'flipped', consider the following:

1) Have the home professionally inspected
2) If there are red flags, investigate further. Do not take for granted that the home inspector is the final word on whether a home is a good purchase
3) Try to get pictures from the sellers with images of what the home looked like when they purchased it.
4) Try to get the home inspection from the sellers when they purchased it.
5) Try to meet with the sellers to find out exactly what repairs they made. It doesn't take a rocket scientist to figure out if they did mostly cosmetic repairs or if they actually fixed the nuts, bolts and bones of the home.
6) Was the work done by sub contractors, or was it done by the actual sellers?
7) How long did the work take and what was the budget? This will be difficult to get, but any information might be useful. If their budget was $10,000 and the house is more than 20 years old, you might start to think that some corners were cut.

These are just a few of the items to look out for. If you have any others, feel free to leave a comment or send me an email. Remember, purchasing a home that has been 'flipped' can be a great purchase. But it can turn out to be a big ol' headache too!