What should I look for when buying a house that is being "flipped" by an investor seller?

Wednesday, September 19, 2018

“Fresh paint, granite counter tops and a bad roof” is our definition of a flip house. They are typically homes in poor condition that were bought cheap by an investor to renovate and resell quickly—or “flip”—for a profit. You may have seen ads for get-rich-quick video courses on how make money fast by flipping houses. The focus of the investors in these renovations is interior finishes and fixtures: trendy paint colors and flooring, along with kitchen and bathroom updates. 

   The flip investors put their money “where it shows,” but often ignore not-so-glamorous, but important components like roofing, the HVAC system, and water heater. Also, the work may be done by handymen, without any building permits or inspections, instead of licensed contractors. As a result, it looks good on a walk-through but the home inspection goes poorly after you’ve signed the sales contract.

   Not all flip houses are problematic. Many of them are legitimate renovations that add both value and life to an older home. But here’s a few things to look out for when evaluating an investor renovated house:

•• Deteriorated bathroom tile that has been painted over. Looks good, but the paint will begin to peel shortly after you move in and use the shower several times. Here’s an example below, where the tile has been painted white, and the faucet handles and spigot spray-painted silver.

 •• New bathroom vanity that is not attached to the wall.

•• Goofy handyman plumbing, like this example we saw under the sink at a recent flip house inspection.

•• Roof that has been pressure washed to look newer than it is. This cosmetic improvement actually shortens the life of the roof. Tab adhesion of the leading edge of shingles is deteriorated and granules on the shingle get blown off.

•• Ancient water heater and air conditioning system.

•• Spray paint job on the exterior without any prep of the surfaces, with overspray on window frame, faucets, and plants.

•• All the old 2-slot ungrounded receptacle outlets replaced with new 3-slot receptacles with no ground connection. This will be checked by the home inspector.

•• No electric receptacle in the bathroom. Older homes had a receptacle in the base of the light over the sink, but new bathroom light fixtures no longer have them. You end up with a bathroom with no place to plug in anything.

•• Refrigerator in kitchen has ice maker, but no water line serving it. Yes, this happens more often than you would expect.

•• Older garage door spray painted, but in poor mechanical condition.

•• New interior doors, but they won’t latch properly or stay open due to sloppy installation.

•• Access opening to the crawl space has been screwed closed and caulked, or blocked-up, to discourage inspectors from checking under the home.

•• New flooring installed over rotted or termite-eaten wood subflooring, like the example below, looking up at the subfloor from the crawl space.

•• Laminate wood flooring installed too tight with areas of buckling.

•• A recently enclosed back porch with no air conditioning vents in the ceiling.

   For your protection, it’s especially important to get a professional home inspection on an investor renovated house. The inspector will delve deeper into the home’s condition, opening the electric panel to examine the wiring, walking the roof, checking out the attic, testing the HVAC and appliances, operating the doors and windows, along with evaluating multiple other components. Find out what’s under all those sparkling new finishes before you buy.

   Talk to the neighbors too. They can tell you about the history of the home, what condition it was in before renovation, and if it remained unoccupied for a long period of time. Then we suggest checking with the local building department to confirm that the repairs and improvements were done under a building permit with a final inspection. Many building departments today have their permit records available online at no charge, while others will respond to a phone call request for a home’s permit history. 

   A professionally renovated older house can be both a good buy for you and a profitable investment for the renovator, but not all “flip” houses are as wonderful as they first appear to be.

    Also, see our blog post How do devious sellers try to fool the home inspector?

• • • • • • • • • • • • • • • • • • • • • • • • • • • • 

  To learn more strategies for getting the best possible home inspection, here’s a few of our other blog posts:

How can I make sure I don't get screwed on my home inspection? 

How thorough is a home inspector required to be when inspecting a house?

Should I trust the Seller's Property Disclosure Statement?

Can I do my own home inspection?

How can homebuyers protect themselves against buying a house over a sinkhole? 

The seller gave me a report from a previous home inspection. Should I use it or get my own inspector? 

    To read about issues related to homes of particular type or one built in a specific decade, visit one of these blog posts:

What are the common problems to look for when buying a 1940s house?

What are the common problems to look for when buying a 1950s house?

What are the common problems to look for when buying a 1960s house?

• What are the common problems to look for when buying a 1970s house?

What are the common problems to look for when buying a 1980s house?

What are the common problems to look for when buying a 1990s house?

What problems should I look for when buying a country house or rural property? 

What problems should I look for when buying a house that has been moved?

What problems should I look for when buying a house that has been vacant or abandoned?

What are the most common problems with older mobile homes?

What do I need to know about a condo inspection?

What are the "Aging In Place" features to look for when buying a retirement home?

    Visit our SHOULD I BUY A… and COMMON PROBLEMS pages for other related blog posts on this subject, or go to the INDEX for a complete listing of all our articles.

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