Homebuyers

When Buying a Flip, Beware of Sudden, Sharp and Showy Improvements

Look up "flip" in the dictionary and you will find "turn over" or "cause to turn over" in "a sudden sharp movement" for the definition.

Experiencing a sudden sharp movement might be fun if you're riding a roller coaster, but it's not a term you necessarily want to be attached to your next home.

Yet, because 6% of all home sales were flip houses in 2016*, you may encounter one at some point in your home search. Before punching your ticket on a flip, take some time to learn how flippers work and what you can do to keep from lurching into the wrong deal.

The Flippers

There have always been investors who have bought houses to renovate and then resell them at a tidy profit. The practice is as American as cherry pit-spitting and pumpkin-chucking contests.

After the Great Recession, however, flippers came out of the woodwork with professional investors buying properties at public auctions and trust sales en masse.

To maximize their profits, flippers work to make showy improvements in the shortest time possible. These eye-catching touches might include sparkling granite countertops, fancy backsplashes, shining stainless steel appliances, and other fancy fixtures and finishes to lure buyers.

If you happen to preview one of these flips, you may indeed be dazzled by all the bling and be tempted to make an impromptu offer. Before it becomes a rash decision, however, take a step back and try to look for potential hazards or repair issues not so easily detected. Here's how:

Research the property's history

Ask your Real Estate Agent to find out if possible how long a home may have been sitting on the market. Non-use of plumbing and other systems may have caused a whole host of other problems. For instance, when water doesn't regularly run through pipes, cockroaches see it as an open path to your kitchen and beyond.

Check the public record

Permits, or lack of them, can also prove revealing. If you see a new kitchen countertop and see a permit was pulled for the project, it shows the flipper is likely playing by the rules. If you see an unpermitted "improvement," however, it may cause you to wonder what other corners the contractor might be cutting. Unpermitted rooms also don't count as part of your home's square footage.

Inspect what you can't see

Because flippers are out to make a profit in a short period, they often will favor cosmetic changes to bedazzle prospective buyers, electing, for example, to install new light fixtures and drawer pulls instead of replacing the old plumbing or rotted subflooring.

Therefore, besides agreeing to the customary 17-day home inspection period, you may want to carve out a few extra days in your negotiations to bring in your team of experts for a more detailed inspection, paying special attention to such potential hazards as foundation cracks, aging sewer lines, chimneys, and other infrastructure vital to your home's safe operation.

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Flipping houses is an age-old way for hard-working contractors and handy, do-it-yourself-types to make good money. Done right and with integrity, flippers can help even turn around declining neighborhoods and increase overall property values.

But if you're the buyer of a flip, make sure it's on the up-and-up, and not concealing major problems that will blow an irreparable hole in your housing budget. When you properly vet your flip, with the proper inspections and investigations, your rockiest rides will be left for the amusement park, not your home.

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