Home flipping is a common practice in the real estate industry where an investor either takes advantage of low-price properties in order to resell it when home prices go up, or buys a dilapidated property, repairs it, and sells it at a higher price.
Let me get it straight – flipped homes are not bad. But contrary to a newly-constructed homes, for example, or a property sold directly by another homeowner, there might be some risks involved in choosing a flipped property to be your new abode.
What risks?
Physical issues with the rehabilitated home, for instance, is the most common concern. It could be that the materials used to repair the house were substandard or that the house wasn’t checked for pest and molds after being left idle for so long. The seller could also be caught in trouble with liens on the property.
If you’re lucky, you might have come up with a good investor who paid time, money, and patience to get a good renovation job on the property so that everything came out premium-grade. But just to make sure that you are really getting your money’s worth, it might be necessary to do these following checks:
A list of repaired parts
Ask your seller for a run through of the things that have been changed, replaced, and remodeled on the property. During your visit, pay attention to the details, making sure the house looks consistently good throughout. If you notice something out of place, never hesitate to point it out to the seller and ask if something could be done with it (e.g. general overlooks in the construction). Also ask if the house has been checked for molds and pests.
The need for home warranty
Appliance breakdowns not covered by insurance? Don’t worry, a home warrantybridges that gap. Getting a home warranty covers for the costs needed to replace or repair faults in your various home systems and components such as AC ductwork, electrical, plumbing, washers, dryers, etc.
Basement check
A general damage in the basement could give out petty repairs done on the property to cover the more problematic issues of the home. Moist and leaks are some of the most important things to look for when checking the basement, if any. Make sure you talk to the seller about this so repairs and fixes can be arranged.
Doc check
See to it that the seller has secured all necessary permits for the property, else you have to carry on with the problem later.
A necessary lien inquiry
Confirm with the seller if all contractors have been duly paid for the remodeling and renovation job. Liens could spell trouble and delay your closing. Delayed closing means paying for higher mortgage rates. A single point difference in your mortgage interest may seem insignificant at first glance but could actually cause you thousands of dollars worth of interest payments in the long run.
A home inspection would help you diagnose problems with the home and negotiate a repair with the seller. See to it that you never skip this step, especially with a flipped home purchase. If problems with the documents is holding you up too long, be sure the wait is worth it.
