So why should a buyer care if it is a flip? There are several reasons why a buyer if what he/she will be buying is a “flip”.
To know this, research is needed. It needs not be complicated one.
A visit to the county land office, registry of deeds, or wherever real estate documents are recorded and kept in the locality the property is located can give all the information you need.
The deed will tell you when the house was purchased, by whom, and for how much.
The "by whom" can tell a lot. Is the house owned by an company or an individual? Then, information about the company or individual can be further explored using the internet.
If it is a construction company they will have a quite different expense ratio for any work they did on the property than will a non-builder. If it is one of those companies that advertise they buy houses, they may have deep pockets that will make them poor candidates for a cutthroat negotiation.
The deed will also provide clues about the owner's financial condition. Tax liens will show up on record as will any foreclosure activity or bankruptcy. With foreclosure and bankruptcy, the buyer will have a heads up that he/she may not be dealing directly with the owner in any negotiation but with the bank or the courts.
Another recorded document is the mortgage. From this document you can derive the amount the buyer put down - don't be surprised to find it was zero - and the terms of the mortgage; whether it is a fixed rate or adjustable, what the rate and payment is, and, if it is an adjustable, when and by what index and margin it will adjust.
Armed with this information the buyer will be better prepared to make an offer.
There are networks of con artists, who buy and flip properties repeatedly, increasing the price each time and pulling cash from each transaction. These criminals usually disappear once a property is sold with a price more than any realistic number.
That is quick money for them which motivate them to do more flips. So when buying, the buyer should do research to know what they are buying and expect that there will be properties waiting to be flipped.
This is the time for a really thorough home inspection. Pay extra if necessary to have the inspector crawl through the attic, basement, and crawl spaces. You want to know one important thing.
Was the repair properly done or was there just a cover-up? There are products in the market today doing temporary quick fix like or wallpaper that can cover crumbling plaster or water stains from ice dams or leaking siding or paints that covers scarred and stained laminate countertops but those stains will be back within months.
Insist that the inspector pull the electric box to check for problems and watch out for corroded connections and aluminum wiring. Determine if there is any evidence of water intrusion in the basement or attic or if there is any sign of insect or fire damage. If necessary call out a separate expert to check the condition and efficiency of heating and air conditioning systems.
Are the appliances new? If so are they of reasonable quality and with a factory warranty? If they are not new, are the heating elements working; the dishwasher tub relatively rust free; is the energy rating one that won't break the bank?
Carpeting and resilient floor coverings can be new and still be a piece of garbage. Cheap carpeting will not hold up and will be unpleasant to walk on barefoot or for a baby to crawl on. Inexpensive vinyl floor coverings do not always adhere properly, may tear easily, and often quickly lose shine and stain resistance.
There is nothing intrinsically wrong with a flip. Many investors do a fine job of refurbishing properties to useful life and there are many good deals out there right now. Just be informed and know what you are buying. You can always go for a bargain, if you think that the value of the property is just right, and don't be carried away by sweet talk and superficial repairs.
Subscribe