You’ve seen the shows on HGTV and DIY, where they take an old, falling apart, practically burned down house and turn it into a masterpiece. This is what we call a “flip”. The colors and lighting are just right, the artwork is tasteful, the kitchen and living spaces are inviting. The best flippers will even bring in a professional stager. How do you not fall instantly in love?
A Flip: A recently remodeled property that’s been updated with the sole purpose of a quick resale.
The Cold Hard Truth About Flipping a Home
Not all flips are created equal. Keep in mind the true purpose of flipping a home – a quick profit. It’s rare to see a durable and high quality remodel that holds up for years. Of course, there are exceptions and you will find an honest flip if you look hard enough. But before you buy, be sure to weed out the bad ones.
Flippers understand that most home buying decisions are based on emotion rather than logic and reason. And they’re good at tapping into that. They know that the decision is often made in the kitchen and master bath. So, that’s where they spend the majority of the money.
But as they say, don’t judge a book by its cover. Don’t forget about the less glamorous things like the a/c unit, furnace, and water heater. Or the roof, wiring, and plumbing. This is where it’s easy for a flipper to cut corners.
A Trained Eye
A trained eye will catch areas of cost-cutting. Start from top to bottom. Recessed lights are practically mandatory these days, but check the installation. Are they flush to the ceiling? Turn your head towards the floors. Note the quality of material, but also pay close attention to detail. Look for corners, are the floors level to the wall? Are there gaps?
Kitchen cabinets are a biggie. I can almost guarantee they look stunning – the kitchen is always a show stopper. But get in there and get close, this might just be where you make your breakfast, lunch and dinners. Were the old cabinets just refaced? If it’s a new installation, are the drawers lined up correctly? Open them up and wiggle them. Are they sturdy? Do they look like cheap covered particle board?
While you’re in the kitchen, check out the appliances. I’ve sold flipped homes with brand new, beautiful appliances only to find out they were hooked up improperly or never hooked up in the first place. It’s not the inspector’s job to hook them up so if they’re not in working order, he won’t be able to do a proper inspection. You’ll have to ask the seller to hook them up and either pay the inspector to come back out or cross your fingers that they did it right and they work properly.
Can’t my inspector tell if it’s a quality flip?
A good inspection is essential no matter which home you buy. But keep in mind, your inspector will only be in the house for a few hours. He’s not going to take dozens of showers or run the dishwasher over and over. He’ll give you an overall sense of the quality of the work, but only time will tell if the remodel holds up.
So, ask the right questions.
When I have a buyer interested in a flipped property, I try and gauge the quality of the build when flipping a home by asking the seller’s agent a few questions: Have you worked with this flipper before? Does he/she stand by their work after the close of escrow? Were proper permits pulled? How long did the remodel take?
Before I leave you, I want to share an experience when not asking the right questions.
The Nightmare Flip
I had an unfortunate situation with a flipper a few years back. As usual, the house looked stunning. And truth be told it was a high-quality flip overall, with Viking appliances and expensive flooring. But as expected, the flipper did cut some corners. During escrow, we learned that he installed windows without proper permits and didn’t hook up some of the appliances before the inspection.
We made our repair requests to have these items addressed and he agreed. When it came down to closing time, he changed his mind and flat out refused to correct the improperly installed windows and obtain the necessary permits. When the buyer threatened to sue, he hit us with the “good luck”. The home was in an LLC and tracking him down was more trouble than it was worth.
Fast forward a month or so after the close of escrow and the buyer started to receive notices from the HOA stating that not only were the windows not approved by the architectural committee, but also the color of his home was not on the OK list. Only to learn that the flipper knew about these violations and failed to disclose. Now what does the buyer do? Try and sue an LLC owned by a shady guy who’s always on the move? Possibly.
Fortunately, in this case, he was able to work out an exception with the HOA regarding the windows, though he did have to repaint the house. I’m still in frequent contact with the buyer and in the end, he’s happy he made the decision to buy the home even with the many pitfalls of buying a flipped property.
One Last Thing
I should probably share that I’m by no means anti-flipping. I love a good flip just as much as the next guy. But, I am an advocate for a little due diligence. If and when you’re ready to buy, I’ll work to make sure you don’t end up on the underside of a flip.