Here’s what to watch when buying a flipped house
A headline on a current Realtor.com story declares homebuyers should suit up and be ready to do battle during this year’s prime home buying and selling season. It then promised to explain why the market will be miserable for buyers.
Even though the article is based on what’s happening in the nation’s largest metro areas, this year’s local market is going to have its share of challenges. And there’s no great secret to explain why. There’s a lot more demand for homes than supply. It’s economics 101.
But buyers who lost out during multiple offers battles last year are better versed on the market – especially on the advantage of narrowing their focus to the house flipping sector. Buying a flipped house has many advantages. But there are reasons for some extra due diligence.
On average, more than half of them will be in the affordability range. Some are examples of top-notch craftsmanship in the art of taking an older custom home and rejuvenating its good bones into an affordable fit for today’s market. There are also examples that can turn into a money pit for new owners.
Flipping houses has evolved from a minor part of the local housing market to mainstream. A decade ago, flip sales accounted for about 2% of existing-home sales. At the end of the third quarter last year, they accounted for 10%. The average sales price of those sales has been below $200,000. That’s the price point that the typical existing home sale is bouncing around here in the local market. But that doesn’t mean all flips are in the starter-home range. There are examples of high-end flips.
Buying a flipped house is often a smart thing to do, but it’s important to verify that it’s the good deal you think it is.
The first thing to check is was the house the seller’s primary residence. If not start running your flipped checklist.
Does the seller have a history as a flipper? Some are local pros. But their examples of others who make cosmetic changes, inflate the selling price and get it back on the market. If the seller has flipped several homes, get the names of the people who bought them. How do they like what they bought?
Get a list of what has been done to the home. With it, you can eyeball the improvements, open and shut the doors, and get a hands-on impression of the quality of the work.
It’s also important to check that any necessary permits and or inspections were made. 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.
A couple of checkpoints include turning on faucets and flushing the toilet to see if the water output is weak. A sputtering faucet could also signal an aging pipes issue. Open cabinets and drawers and inspect the hardware. If anything is uneven or misaligned note it. Are the doors and windows in good shape?
One of the best strategies is to hire an independent home inspector to double-check your observations and to look for the things a professional is trained to do. A licensed, accredited, and insured inspector will go over the property and give you an itemized list of his findings.
With careful consideration and the help of professionals like a local REALTOR® and a home inspector, you can take advantage of the benefits of newly renovated flipped homes while avoiding most of the risks.
NETAR is the largest trade association in the Northeast Tennessee, Southwest Virginia region representing over 1,500 members and 100 affiliates involved in all aspects of the residential and commercial real estate industries.
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 1,600+ 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