If you are in the market for a home, chances are that you have come across or will come across a flipped home. If a seller bought the home recently and is already selling it, chances are they are trying to flip it. They probably bought the home in less than perfect condition, fixed it up, and are now trying to sell it for a profit.
Before you go ahead and buy the home, consider the following precautions you should take.
Know What Was Fixed
You can tell yourself if a home was flipped just by looking at the home’s sales history. This is public record information that you can get from your local courthouse. If the home was bought within the last six months, chances are the seller fixed it up and is trying to sell it. That’s fine, but you need to know what he fixed.
Before you put in a bid on the home, ask the seller what condition the home was in when he bought it. Also, ask specifically what improvements the seller did to the home. Did he hire someone or do it himself? Make sure your inspector is aware of the situation too so that he can pay careful attention to the areas that are most important in the home. You want to make sure that whoever fixed up the home did it right and that you aren’t buying a home with a lot of problems.
Know the Seller
Even if you are using real estate agents, specifically ask who is selling the home. If it’s a company, you should look into the company’s history. Oftentimes an LLC can buy a home to flip it and then liquidate the company. When you find things wrong with the home and try to come back at the company that sold it to you, they no longer exist.
Instead, you should try to buy from an individual. If you do buy from a company, make sure it’s one with a long track history. If you notice that the company just opened recently, it’s a red flag and a sign for you to not buy the home.
Ask if Requirements Were Followed
One of the worst things to find out after the fact is that the seller didn’t get permits for the work he did on the home. Don’t just ask if permits were issued, ask to see proof of them. You can also check with your city to see what they have in their records.
If permits weren’t issued, the work may be ‘shady.’ You may also find that the areas that were renovated don’t meet the city/county code. It would then be up to you to pony up the money for the repairs, even though you didn’t do the original renovations.
Was the Home Vacant?
A vacant home isn’t always a bad thing. It can mean that you can move into it quickly, which can be nice. But, how long was the home vacant? Was it a few months or a few years? Vacant homes don’t have anyone looking over them. This could mean all types of damage occurred including water and pest damage.
If you know the home was vacant, you’ll want to pay careful attention to areas where flooding or water damage may have occurred as well as pest damage. Investors/flippers often quickly mask the problem areas with wall-to-wall carpeting or a fresh coat of paint. You walk into the home feeling refreshed at its newness and don’t realize the mess that is occurring behind the walls and the floors.
You’ll Need More Money
No matter how much money you budget to buy the home, always plan on needing more. It’s a good idea to tack on 20% of the purchase price as an ‘emergency fund.’ What if when you move in you realize that you’ve been had and the wall-to-wall carpeting is covering molded and warped flooring? What if the home isn’t up to code?
If you don’t have money set aside, you could find yourself in financial distress right from the start. That’s not a place you want to be as a new homeowner. Make sure you have at least 20% of the home’s price set aside for these instances.
Buying a flipped home can be fun and possible stress-free, especially since you don’t have to do a lot of the work involved. But it can also be a headache if you aren’t too careful. Make sure that you take your time and ask as many questions as you have about the home so that you know exactly what you are getting yourself into.Click to See the Latest Mortgage Rates»