The housing market is pretty hot nowadays, and investors are flipping like it's 2006 again. If you've been browsing homes for a while, you've probably come across flipped houses. But, buying a flipped house can be risky business. Our REALTORS® are more than happy to guide you through the process and ensure you avoid any pitfalls.
If you're looking to buy a house in this market– for instance, these Mansfield and Ashland homes for sale – knowledge is the best tool you have at your disposal. So, here's a guide to help you figure out whether a flipped house is worth it.
Buying A Flipped House: What You Need To Know
House flipping occurs when a real estate investor buys a house, makes some upgrades, and sells it at a profit. House flippers do it to make money. That's not to say you should discount these houses. You can get a great deal on the house, considering you don't have to dig further into your pocket to make renovations.
Still, it's best to proceed with caution. Here are a few things to look out for to ensure that the property is worth your investment.
- Check the Property History
It helps to be skeptical. The old adage beauty is only skin deep applies in real estate as well. Since flippers are looking to make a profit, they might rush through the renovation process making only cosmetic fixes to the home. Look at the details, don't get fooled by the flashy upgrades.
You can have a look at transaction records at your county recorder's office. The timeline for a house flip is typically nine to 12 months. If the timeline is shorter than this, proceed with caution. It takes time to do proper upgrades and get a house market-ready.
- Research the Flipper
Flipping is a business like any other – it takes skill and experience to do it right. Always do your due diligence. Every flipper has different standards of work. Find out if it's the first home they've flipped. What contractors did they use?
It's crucial to ensure that the flipper used a licensed and reputable contractor. Otherwise, you might end up with a house that's not up to code. If the seller or contractor has been sued for poor practices, it's a sign to back out.
- Review Permits
Ensure that the house has proper documentation. Check city records and ensure there are no outstanding fees on the property. Ask the seller for a list of upgrades and cross-check them with the records. If upgrades have been done without the proper permits, it might be because they're not up to code.
On this note, ask for an updated seller disclosure statement to inform you of all the defects the seller is aware of.
- Work With A Home Inspector
It's advisable to bring an expert on board in any real estate transaction, especially when buying a flip. An experienced home inspector is better placed to notice the signs of careless workmanship, such as flaws in flooring or defects in wiring.
Cosmetics can fool even the most experienced of home buyers. A neutral third party will spot the shortcuts, and they have the expertise to verify the house's structural integrity.
- Craft Your Purchase Agreement Accordingly
When buying a flipped house, your purchase agreement has to include the right contingencies to ensure that you're protected. Ensure that it includes both an inspection and appraisal contingency.
It's also a good idea to ask for a home warranty as part of the deal. You might have to put some money down, but it'll ensure that any repairs won't come out of your pocket. If the seller is not willing to meet these demands, the deal isn't worth your investment.
Buying a flipped home can be a smart decision. Making repairs and renovations can be an expensive endeavor, more so if you're a first-time buyer. Remember, it's all about being informed. If you have any questions about the home buying process, contact us today! We'd be glad to help you out.