Buying a flipped house? Check and double check it out
Jan Stapleton - 2023 NETAR President
Affordability is at the top of today’s real estate pyramid of concerns. Prices have seen double-digit increases during the past three years and they’re on track for an annual appreciation that will be close to that this year.
At the same time, the 30-year fixed-mortgage rate mortgage rate has risen to its highest level since 2001 with the Federal Reserve’s inflation fighting strategy. It’s pushed a lot of buyers – especially first-time buyers – onto the market’s sidelines while they wait and watch for a home they can afford.
The affordability crunch has given the house flipping market more attention from both real estate investors and buyers. During the first half of this year, flippers have sold 313 of their rehabs and half of them have been in the affordable range. Those sales in the affordable zone took some of the edge off the local market’s lack of affordable existing single-family home and condo inventory. The rest of the sales were priced in the bottom ranges of the move-up market, and there’s several that are in the luxury market range.
A flip is a property that an entrepreneur has bought, upgraded, and put back on the market. HGTV and other reality TV shows made flips famous. But much – or most – of what is seen on these programs is oversimplified or scripted. In other words, most of it is fake TV.
Flips are a staple of the local housing market. They are a prime source for affordable homes in the $150,000 to $200,000 price range and they support a competitive market for real estate investors.
During the first half of this year, flip sales in Carter, Greene, Hawkins, Sullivan, Washington Co. TN, Bristol, VA, and Washington Co. VA accounted for a little over 8 percent of existing home sales according to ATTOM, a leading land, property, and real estate data curator.
There’s no doubt about it. Buying a flipped home can be a smart move. But it involves extra care to ensure you’re getting the deal you hope you’re getting. The extra due diligence is needed because when there are some not-so-savory characters who slip flips with shoddy work into the mix. Some of those can’t get past a building code or home inspection.
Here’s some pointers from local flippers and Realtors® who have seen their share of the good and bad examples. They are suggestions that have been made before, but given market conditions and what building inspectors are saying, they are worth reviewing again.
Does the seller have a history as a flipper? Ask for the names of people who bought a home from the flipper. Talk to them.
Get a list of what has been done. With it, you can eyeball the improvements, open and shut the doors, and get a hands-on impression of the quality of the work.
The “what has been done” list is also the gateway to check that any necessary permits and or inspections were made. And don’t overlook the need to confirm that the folks who did the work had any or all of the licenses required. The seller should have copies – most do because it moves the process along, and they’re interested in selling the property as quickly as possible to recoup their investment.
Buyers should also hire an independent home inspector. A licensed, accredited, and insured inspector will go over the property and give you an itemized list of the findings.
Flipped homes are an important part of the local housing market because they take homes where maintenance has been neglected, ones that are dated and need a facelift – or more – and get them back into the housing inventory. A good flip can mean a good deal. But a poor flip can be a money pit for buyers who don’t do some extra due diligence.
NETAR is the voice for real estate in Northeast Tennessee. It is the largest trade association in the Northeast Tennessee, Southwest Virginia region, representing over 1,800+ members and 100+ business partners involved in all aspects of the residential and commercial real estate industries. Weekly market reports and information for both consumers and members are available on the NETAR website at https://netar.us