Flippers in a Nut Shell
Here's the 101 on flippers. Flippers are investors who buy a home, preferably in its original condition, at a price they hope is under market value in a desirable neighborhood. Then they fix it up for as little money as possible and as quickly as possible to roll it over (flip it) to the next sucker -- er, I mean unsuspecting buyer -- who comes along for a lot more money.
Remodeling a fixer and turning it over for a profit is a legal and accepted way to make money in real estate. However, there are other ways to do a flipper that are against the law.
What to Watch Out For When Buying a Remodeled Flipper
Assuming the investor didn't pull any funny business when buying the home, and most investors are honest, buyers still should exercise caution when considering a flipper.
Flippers are attractive to buyers because they are turn-key homes -- everything is new, sparkly and fresh, including the appliances. If the price is in line with the comparable sales in the neighborhood, it doesn't matter, really, how much the investor originally paid for the home.
- Hire Your Own Agent.
Hire a buyer's broker to negotiate for you. Sellers generally pay your agent's fee. A buyer's broker will look out for your interests and represent you, not the seller.
- Get a Home Inspection.
Ask the home inspector to thoroughly investigate the plumbing, heating, electrical and mechanical apparatus in the home, including structural. Take along a home inspection checklist to verify nothing was overlooked.
- Hire Experts Recommended by the Home Inspector.
If the inspector suggests you obtain other reports such as a roof inspection, sewer inspection, HVAC report, chimney inspection, structural engineering report or pest inspection, follow the home inspector's advice.
- Carefully Inspect for Quality of Workmanship.
Look for signs that the flipper cut corners or tried to save money by using inferior products or materials. Note any defects you find and ask for repairs in the purchase contract.
- Check With the County for Permits.
Not pulling a permit for work requiring a permit is common and not necessarily a deal killer. However, there is no guarantee that the work was performed according to code if the flipper didn't obtain a permit.
- Get a Home Warranty.
With a home warranty plan, buyers are covered for one year in the event a system fails, electrical malfunctions or plumbing leaks. Home warranty companies charge a service call fee, but the repairs are free.
At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.