News
June 16, 2019

When buying a flipped home, trust but verify

By KAREN RANDOLPH

There is an old Russian Proverb that is good advice for anyone thinking about buying a flipped home.


KAREN RANDOLPH
2019 NETAR President

The advice is: “Trust but Verify.”

Ronald Regan used the dictum - without attribution - to make a political point, which interjected into the U.S. narrative. That great story is one for the history books.

TV shows like HGTV’s “Flip or Flop” and A&E’s “Flipping Vegas” gave house flipping notoriety, but it has been around for ages.  It gained more local footing when the Great Recession forced an abundance of foreclosed properties on the market. Some were bought by individuals who leveraged their savings and sweat equity for a good deal on their primary residence. Investors also bought some of them to build their rental inventory. Full or part-time flippers are a part of this buyer demographic. They find a property that needs some tender loving care – or upgrades - at a bargain price, do the upgrades, buy new appliances and resell it. That investment makes sense because selling a home with a smaller to-do list is frequently more marketable.  There are the flippers who invest in major upgrades and remodeling for a bigger sales price also.

During the first quarter of this year, flip sales accounted for a little over 7 percent of all sales in Washington County, the highest share it has been in six years. Flips did not command the same market share in Sullivan County. It was 6.8 percent, which is a little off the pace from the first three months of last year.

Flipping is alive and well in our other local counties, although we do not always get year-over-year numbers for them. Sometimes the smaller local county markets do not meet the house flip benchmark to be included in Attom Data Solutions’ quarterly reports.

Flips have become an important factor in the overall housing market. They have been a big factor during the past two years when the inventory of listings in the $200,000 and below price range hit record lows. That price point is where most of the existing home sales and flips happen in our area. So, flips added to existing home sales total while helping hold back the average price increases that nibble away at the area’s housing affordability position.

Buying a flipped home is often a smart thing to do, but it involves some extra sleuthing to ensure that you are getting a good deal.  An appraisal is a major component of the “trust but verify” the purchase price is in alignment to market value.

If the property was not the primary residence of the seller start running your check list.

Does the seller have a history as a flipper? There are good ones out there, and unfortunately there’re some who are not so good. If the seller has flipped several homes, chat with the buyers who purchased their homes.

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 is also a good idea 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 are interested in selling the property as quickly as possible to recoup their investment.

One of the best strategies is to hire an independent home inspector. A licensed, accredited, and insured inspector will go over the property and give you an itemized summary of defective and marginal items.

NETAR is the voice for real estate in Northeast Tennessee. It is the largest trade association in Northeast Tennessee, Southwest Virginia region representing over 1,200 members and 100 affiliates involved in all aspects of the residential and commercial real estate industries. Pending sales, monthly Trends Reports, and the regional market analytics can be found on the NETAR websites at https://netar.us/voice-real-estate-northeast-tennessee .

 

 

 

 

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