If you’re a buyer in the real estate market, a flipped or recently renovated home can be very appealing. A turn-key property allows you to move in with little to no changes. Plus, the home is most likely empty, so your move-in timeline could be quick. But buyer beware: Behind the shiny updates, there could be costly problems.
First, how do you you know if the home is a flip? Search the property’s data on the Dallas Central Appraisal District site (or the site for your county); you can also have your realtor pull up the home’s sales history. If the house has been purchased within the last year to 18 months, it’s probably a flip. This should caution you to dig a little deeper into the history of the home to find out how well it has been renovated.
A flip that was not well executed could be the result of a contractor who cut corners with cheap cosmetic updates and temporary fixes for complex plumbing problems. Real estate agent Stefani Myers has first-hand experience dealing with a bad flip. (It’s actually what prompted her to became an agent.) When she and her husband moved into a renovated 1970s house several years ago, they encountered a series of issues. “Three months after we move in, we notice our floors are warping,” says Myers. “They are brand new floors, too. It was one of the things the investor had replaced. Come to find out, the sewage line had leaked because the plumbing was so bad from the home’s cast-iron pipes.” The 40-year-old pipes were starting to rot from the inside out.
Myers and her husband were also told that the home had recently undergone foundation work, so they assumed any problems were taken care of. “We didn’t know to ask for any supplemental documentation,” shares Myers. Even after hiring an inspector, no real foundation issues were found, and the warranty was transferred. Had they asked, they could have ordered a hydrostatic test and found the sewage issue before they purchased the home. Instead, Myers ended up with a $30,000 bill to fix the entire sewage system.
On top of that, the only suggestion from their inspector was to ask for a new water heater. So they did. However, what they didn’t know to do was to ask for receipts and pictures of the new fixture. “They replaced the water heater with an old one,” she explains.
Remember: A flipper is looking for a financial gain. If done wrong, the home becomes a money pit. But if done right, it could be a win-win. Real estate agent Angela Key has been renovating and flipping homes for 25 years. She’s also represented buyers and sellers who have renovated homes for a profit. “A flipped home is brilliant for a purchaser,” she says. “It’s move-in ready.” But like Myers, Key also cautions buyers to perform their due diligence before making one of the biggest purchases in their portfolio. Key, Myers and real estate agent Lance Hancock, who has helped his clients buy and sell flips, give their trusted advice to follow before making an offer.
Make sure you walk through the house with an agent.
Hancock notes that while listing pictures may be pretty, the only way to know if the materials used to finish the house are of high quality is to physically walk through it. “In a flipped house, everything looks new in a photograph,” says Hancock. “It’s hard to see the quality of it. So the floors can look clean and attractive, but when you actually walk on them, they feel tacky or not solid underfoot. That’s a red flag.”
The expertise of an agent can help you quickly determine if the flip is of good quality. “An agent should understand the majors: the plumbing, the foundation, the roof and the windows,” says Key.
Myers also emphasizes that hiring the right real estate professional can help you from making a huge financial misstep. As noted, Myers wasn’t in the residential real estate business at that point, and it was the first time she and her husband had purchased a home. “We had no clue about the process,” she says. “We saw this home and loved it.” Myers warns buyers to make sure their agent is versed in flips and new renovations. “If they’ve been in the industry some time, they’ve experienced the correct things to look for.”
Gather all the information you can about the contractor or flipper — including referrals.
“I like to know who the flipper is and a little bit about them,” says Hancock. “It’s important to know what else the investor or the flipper has done in the area and if they have a reputable name.” The research phase is important: Ask for referrals, interview other agents who have worked with them, talk to homeowners, and check the contractor’s social media and websites for reviews. Another sign that a flipper is reputable is a clean and tidy job site. “That shows an attention to detail. That’s very important,” says Hancock.
Never push forward without a full inspection and verification of fixes.
“People get excited and buy on emotions. That’s where some people get in trouble,” Key explains. “Emotions are good to follow. But follow your brain and don’t just follow your heart. Make sure you get a full inspection to protect yourself.” When Key is helping a client purchase a flipped home, she always tells her buyers to be prepared for something to come back on the report. “I’d rather it be brought up to the surface now than after the fact. Anything can be fixed — for a cost, of course.”
And don’t forget to ask as many questions as you want. The sellers should disclose all the information they have. “The more knowledge you give to a buyer, the better informed they are on making a decision for themselves,” Key points out.
Myers recommends her clients always ask for receipts and documentation after the investor agrees to fix or replace something after the inspection. “Make sure they take pictures and use a certified professional for installation,” she says.
Have the plumbing thoroughly examined.
As we learned from Myers’ story, always take the time to hire a professional plumber to run a diagnostic test. “A lot of flips are primarily cosmetic renovations, so everything looks really good. It’s polished and clean, but you might have old cast-iron plumbing underneath the house,” Hancock says. He goes on to explain that a dirty job site could also wreak havoc on the plumbing lines.
“Sometimes dust and dirty rags can build up in the lines,” he warns. “Everything is fine for a week or two, and as the new owners are running their washing machine and bathrooms, the plumbing is all backed up and they find out that there is debris in the line. You can avoid a lot of that kind of thing with a thorough plumbing inspection.”
Look for unfinished or sloppy details in the home’s finish-out.
Some of Hancock’s warning signs for a poorly executed flip include details that look unfinished or sloppy. “If you see windows that aren’t sealed correctly, outlets that are loose, or gaps between outlet plates and tile, that tells me they had people come through really fast, and they weren’t there supervising,” he shares. And while some finish-outs may vary based on your budget, he still recommends looking at the doors as a sign of the property’s investment. “Cheap, plastic hollow-core doors increase profit margin but do not deliver quality to the user,” he says. “It says something about the flipper.”
Key suggests looking at the caulking around the bathtubs, windows and especially around sinks. “If your kitchen doesn’t get caulked, water falls back behind the sink faucet. And because you’re spraying and cleaning dishes, water gets back behind there and it erodes the caulking,” she says. “If you don’t keep it caulked, it could start bubbling up and you may see signs of upheaving in the bathrooms or the sinks in the kitchen.”
Confirm that the air conditioning units are functioning properly.
The seller should disclose if the units are new or not. But if they are old, look for soot coming out of the vents. “If there is soot, they aren’t maintaining their units,” says Key. Ask a heat-and-air specialist come out to check the unit and filters.