11 Tips to Buy a Flipped House

Investors in California have been busy buying distressed homes to rehabilitate and renovate then sell for a 10%-50% profit margin. As a buyer, when you see a house that has been recently renovated, you need to ask your realtor if this renovation was done by the homeowner or flipped by an investor. There is an evident difference in the quality of workmanship and possible lingering issues yet to be addressed. Buyers: Do Your Homework. 

1. Ask for existing inspection reports

Prior to submitting an offer, ask your realtor to request any inspection reports done by the seller or a previous buyer. Some investors will perform at least a pest inspection to avoid surprises that put a damper on the sale during a transaction. The seller must share the inspection report with potential buyers. So, do not hesitate to ask.

2. Perform as many types of inspections as possible

If the seller did not perform any inspections, you have no way of knowing the condition of the major parts of the house unless you order those inspections yourself. Yes, inspection cost is a direct up-front cost to buyers. Therefore, a set-aside budget for inspection costs needs to be accounted for prior to committing to purchasing a house. On older homes, the buyer should do the following inspections: Pest/termite, home, roof, sewer, and heating and air (HVAC). Structural inspection is necessary if recommended by any of the inspectors above or if you see a need for it.

3. Be present during Inspections

Inspect the House Thoroughly: Most buyers depend on their realtors or other agents to be present during inspections. Buyers do not need to be present during the entire period of inspections. However, it is extremely important for buyers to free themselves and be present by the end of inspections… say the last 20 minutes. Inspectors usually walk you through the house and show how things operate on one hand. Most importantly, they show you where the repair is a must or if the repair can wait. Being present during a walkthrough with inspectors will help you make a sound decision when you ask the seller for repairs.

4. Check if Crawl Space is a Nightmare

Houses either sit on a concrete foundation or a raised foundation. Raised foundation homes, especially those older homes, could have major dry rot and fungus. They might also have active termite and/or rodent activity. If the access to the crawl space is small and your inspector is unlikely to fit in, do not encourage skipping the crawlspace inspection to just finish the inspection task. You can ask the company to send someone who could fit through the opening. Rule of Thumb, since buyers are not likely to visually inspect the crawl space, ask the inspector to take photos for you. Pest inspectors usually do not take photos for the purpose of the report. If you do not ask them, they will not take any photos. If you are not present at time of inspection, you will miss on that opportunity. Venting is another issue in the crawl space. There must be a way for air to circulate under the house. If there is not sufficient venting from all sides, mold might build up and cause health issues and damage to subfloor wood.

5. Check Cracks in Concrete Foundation

If the house you are buying is on a concrete foundation, you need to watch for cracks and the size of cracks in concrete. If you see tangible-sized cracks in concrete outside the house, but running inside the house, you need to examine where the cracks are going inside the house. If there is a new carpet where you expect to see the tail of the outside cracks, then you have a problem that is worth checking. A structural engineer will be able to examine if the structure has major issues to address.

6. Do not ignore Electrical Wiring and Main Switch

Fire Hazard in Main Panel: Old main switches could be a fire hazard. Electrical re-wiring in an older house is a very expensive item for investor flippers. Re-wiring requires a licensed electrician, who usually charges thousands of dollars. Most flippers leave that task undone! Bad electrical wiring could lead to fire. Hidden wires in the attic could spark and lead to lighting of the insulation material. 

7. What’s in the Attic?

Normally, there is insulation, air ducts, water pipes, and electrical wires in attics. The attic is also a storyteller. You can find out more history about the house than what’s in the living space. Inspectors, sometimes, find charred wood, which is clear evidence of a past fire. Most flippers do not know about a past fire if they have just recently bought the house and they have not done an inspection. It is a negotiation item for the buyer. The attic could have active rodents or evidence of it. The attic could have low or no insulation, which contributes to low-efficiency home and high utility bills down the road. Make sure the attic is properly inspected. 

8. Roof Inspection is a Must

Water penetrates through rain boots on the roof. Roof repair or replacement is one of the high-ticketed price items in flipping a house. Almost all investors selling in the summertime will ignore roof repairs because shingles are dry and leaks do not show. If they are selling in a rainy season, they will do minimum repairs to cover any issues. The home inspector will climb and take photos. He also could recommend a roof specialist if he suspects major issues. Watch for mildew on shingle edges, missing shingles, debris from adjacent trees, and any patches recently done.

9. Ask the seller to do all repairs

Seller should agree to do all health and safety issues that appear on any and all inspection reports. Not all sellers agree to all repairs requested. As a buyer, you need to weigh in the cost of any items that are left unrepaired. Such items could jack up the home price for you and you might be better off buying a different property that do not have such issues.

10. Pick Best Time to Buy a Distressed House

Rain season is the best time to buy a House: Flipped homes are sold all year round. Buyers should buy flipped homes winter season and even best during the rainy season. Make sure to schedule an inspection on a rainy day! Why? Because only rain will show you if there are any leaks in the roof. Only rain will show the condition of the crawl space, which sometimes functions as a water collection pot. If that’s the case, major work needs to happen to divert water from going under the house and causing thousands of dollars in damages. The dual-pane windows will fog or you will see water condensation inside, which is evidence of the failing seal of the windows. Call, text, or email for advice on any issues you might have or to hire a realtor.

11. Do You Want to Buy a Flipped Home?

A professional realtor will handle your transaction and related inspections: Make sure that your realtor is a savvy agent when it comes to inspections. Your realtor needs to be equipped with sufficient knowledge about what to look for in a flipped home. Having fresh paint, granite countertop, new kitchen cabinets, and new floors might only be a trap for first-home buyers. Do not fall into that trap. What is hidden under and behind those nice finishes could be a deal breaker if you are lucky to discover them. For all your questions, contact me.