If you plan on buying a home in the near future, chances are you’ll come across a flip in your search.
2013 was a banner year for house flippers. They grossed an average of $90,200 per flipped home across major U.S. housing markets, according to Redfin research. This is not surprising since housing inventory was notoriously tight and demand led to unprecedented bidding wars in 2013.
In other words, flipping came easy.
As we enter the final months of 2014, however, there are more homes for sale and buyers have more leverage when it comes to getting a fair price. Here’s how to know if a home is a flip and to make sure you get your money’s worth if you are considering buying a flipped home.
1. Spot the flip
There are several telltale signs you’re dealing with an investor-owned property:
If the home is vacant and professionally staged, you can bet an investor is afoot.
Owner-occupants rarely install brand new landscaping in order to sell their home. If the yard is smattered with saplings, it’s probably a flip.
On-trend finishes on the cheap typically indicate you’re dealing with a flipper. Newly installed laminate floors, stainless steel appliances and midcentury accents in the staging are all ways flippers appeal to contemporary tastes without breaking the bank.
Of course, one of the best ways to spot a flip is to simply look at the property records. Redfin makes this easy to do and it’s one of the most popular features on the site. When you land on a listing description page on Redfin.com, click the “property history” tab just above the listing photos to jump down to view the property’s previous sale price and date.
If the home was bought less than a year ago and it’s already back on the market, it’s likely being sold by an investor.
2. Evaluate the efficiency
Now that you know you’re dealing with a flipper and therefore may be paying a premium, an excellent way to judge the quality of renovations is to consider what has been done for the home’s energy efficiency. Yes, buying a high-efficiency home will save you some serious money on monthly energy expenses. But perhaps more importantly, if an investor has paid attention to the details that make for an energy-efficient home, it’s a good sign they did their due diligence elsewhere as well.
Energy Star rated appliances;
Well-framed, vinyl, double-paned windows with wool pile weather stripping;
Not just a new door, but one that is hung correctly with new weather stripping and a tight seal; and
Attic floor insulation – if you can see floor joints or the insulation looks dingy, it was likely not replaced.
3. Check under the hood
Many flippers will slap some paint on the walls, throw in a new fridge and range and call it a day. Those who are really committed to quality renovations will also pay attention to the home’s guts. Check under the hood and look under the sink at the plumbing: If the pipes are wet or there is lots of mineral buildup, the plumbing was probably not touched; at the duct work: Old ducting is simply sheet metal shaped into tubes or rectangles. If the duct work was redone it will be modern fiberglass or even double-backed flexible aluminum; and at the foundation: A home inspector can do this best, but since many flippers buy at bargain prices, there may be structural defects involved that have gone unnoticed or unaddressed. Look for sticking doors and windows, bulges or visible cracks in the foundation and slanted or uneven walls and floors.
4. Determine a fair price
Since many well-informed homebuyers know exactly what the current owner paid for the property, it’s easy to get caught up in comparing today’s asking price with yesterday’s deal. But there are a few things to keep in mind when assessing the fair market value of a flip.
Don’t put too much stock in the previous sale price. Yes, flippers are looking for profits, but it is very difficult to determine what a flipper’s margin actually is just by looking at the price paid for the property. You must consider the price of renovations, the seller’s closing costs (which can be substantial) and any price appreciation/depreciation that has occurred since the previous sale.
The sale price of comparable properties in the market ought to determine if you’re getting a fair deal. That means a sober assessment of the price other flipped homes in the neighborhood are fetching. Only an experienced local agent can accurately determine this number. If you’re looking at flipped homes in your current neighborhood, you can get a great idea of how your current home value compares to the flipper’s asking price by claiming your home with Redfin’s Home Dashboard. This won’t replace your agent, but it will give you a ballpark of what to expect when you eventually sell your current home and how it stacks up against others for sale nearby.
The bottom line in buying a flipped property really holds true in just about every real estate transaction: A well-informed real estate agent who is a regional specialist and has experience with the local flipping scene is invaluable to ensuring that your home-buying experience goes smoothly.
To view the original article, click here: http://blog.redfin.com/blog/2014/10/buying-a-flipped-home.html