Flip or flop? What to know about buying a flipped house.
With all those shows on TV about fixing up old houses and flipping them for a profit, you may be wondering whether buying a flipped house is the right route for you. The reality is that flips aren’t for everyone, and it’s important to know the pros and cons before you make that offer.
With that in mind, we’ve created a guide on buying flipped houses. Here are the most important things you should know about buying a flip, as well as some of the pros and cons of going after this unique type of home.
What is a flipped house?
Flipped houses are homes that are bought by investors, quickly renovated, and sold at a premium. These houses are typically older, have been sitting on the market, or are unattractive in some way that makes sure they can be bought for a steal.
The investor will then make the necessary repairs to make sure that the home becomes attractive to buyers. Usually, these are cosmetic
repairs, which can keep costs down for them, but sometimes bigger work on things like foundation and plumbing is also necessary.
When the repairs are done — usually just in the span of a few months — the final product is put back on the market to be sold to a regular buyer.
At this point, the home should appeal to many buyers, and the price tag will reflect that: flips are listed for much higher than their purchase price in an effort to help the investors recoup their spending and make a profit.
How to tell if a house is flipped
In general, you can tell a house has been flipped just by looking. A signature hallmark of flipped homes are that they tend to be older, but with new, modern interiors. If you see a home that’s significantly nicer than the homes surrounding it, particularly when it comes to the interior finishes and other aesthetic details, chances are that you’re looking at a flip.
The other way you can tell that a property has been flipped is by looking at the property history, which you can typically find on sites that have MLS listings (ahem, like ours). This details all the times a particular property has been bought, listed, or sold.
Typically, flips don’t stay off the market long, as investors are looking to recoup their money as soon as possible. For example, a flip might have sold to the current owners just a few months ago and is now listed for a much higher price than it was before.
The pros of buying a flipped home
There are some distinct advantages to going the flipped route.
Modern, updated interiors
The biggest advantage to buying a flip is that the interiors are typically up-to-date when it comes to design and modern finishes. Typically, these properties will feature things like granite, marble or quartz countertops, stainless steel appliances, and rainshowers. If you’re the type of person who wants your property to look like it came out of a catalogue, flips could be a good fit for you.
It should be turn-key
Since the house has just been bought and sold, it stands to reason that the current owners would have caught and rectified any major issues well before putting a home back on the market. Therefore, by the time a home gets to you, it should be turn-key, or liveable from the moment of closing without you having to do any extensive work. Unfortunately, however, you can’t always count on this being the case, so you should always do your own inspections to make sure the work is up to par and nobody was cutting important corners to improve their profit.
Faster than new construction
If you want new-looking interiors, you have two options: buy a flip or buy new construction. On one hand, buying a new construction is nice because you have the freedom to select your own finishes and other aesthetic elements. However, on the other, the building process takes months, if not longer, from start to finish.
Buying a flip means skipping the bulk of the waiting time. Though the finishes are chosen for you, you can close on your new home in the same amount of time as a regular resale.
The cons of buying a flip house
There can be some downsides to buying a home that’s been renovated in a hurry. Here’s what you should watch out for:
The possibility of low appraisal
Truth be told, you could end up overpaying for those nice finishes in your flipped home. Often, these houses are priced higher than the rest of the homes in their neighborhood, meaning that getting a satisfactory home appraisal could be an issue.
Unfortunately, banks will only issue you a loan up to the appraised value of your potential home. If that appraisal comes in lower than your proposed purchase price, you could be left to figure out how to make up the difference.
The work could be shoddy
The biggest issue that faces those who buy flips is the possibility that the work you’re paying for it could be cheaply done. While it’s not always the case, sometimes investors will try to maximize their profits by cutting corners on the work that needs to be done on the home. The facade might be nice, but the home’s systems could be in bad shape.
As the buyer, you can minimize the risk of finding out about costly repairs after closing on your home by making sure to complete thorough inspections. A good home inspector will be able to tell when work is poorly done.