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Buying a Flipped House


TwiceHorn

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As mentioned in connection with some other threads, we are downsizing.  

We're seeing an awful lot of flipped houses, either fresh off the flip, or 2-3-4 years ago.

A couple of them have been pretty obviously cheaply done.  Most not obviously, anyway.

I vaguely don't like the idea much.  But flippers aren't all evil, I suppose.

Thoughts? Advice?

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  On 2/9/2022 at 11:56 PM, TwiceHorn said:

As mentioned in connection with some other threads, we are downsizing.  

We're seeing an awful lot of flipped houses, either fresh off the flip, or 2-3-4 years ago.

A couple of them have been pretty obviously cheaply done.  Most not obviously, anyway.

I vaguely don't like the idea much.  But flippers aren't all evil, I suppose.

Thoughts? Advice?

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Oh boy.  

Based on what I "think" I know about Texas real estate laws, I'd be nervous.  

If I were representing you, and you were considering a flipped house, the first thing I would do is pull up the MLS from when the house was sold to the flippers and see how the house was described.  I'd call the listing agent and ask about the condition of the home pre-flip.  I'd ask the flipper to share any inspection reports that they obtained during their purchase, along with any disclosures that the seller made. 

I'd check with the local building authority, and see if there were any violations posted against the property in it's previous ownership, and see if any building permits were pulled by the flippers.

I'd inspect EVERYTHING.  I don't mean some yahoo inspector that took a correspondence course.  I mean an engineer/GC type to go over the house with a fine-tooth comb.  I'd recommend a roof inspection (by a roofing contractor), a sewer camera, an electrical inspection by a licensed electrician, etc.  Y'all have some foundation issues, so I'd have a laser inspection done of the foundation. 

 

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One of the things I see fairly commonly is the house is bought from an estate.

I'd prefer not to have the problems at all, but the problem with a flipper is that it's usually an LLC.

And you can bet that that money they receive from the house sale is leaving that LLC ASAP.

And I don't think that problem is particularly Texas-specific.

Edited by TwiceHorn
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I've only looked at one flipped house in my life.  It was in Northwest Hills off of Westslope.  It had some great potential for someone who wasn't looking to get in and out in a hurry and make some quick money, but I could easily tell that the flipper used average to below-average materials for pretty much every item in the home.  Like worse that what you'd find at a Pulte tract community in Elgin (no offense to any residents of said subdivision).

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  On 2/10/2022 at 2:03 AM, Gil Bang said:
Oh boy.  
Based on what I "think" I know about Texas real estate laws, I'd be nervous.  
If I were representing you, and you were considering a flipped house, the first thing I would do is pull up the MLS from when the house was sold to the flippers and see how the house was described.  I'd call the listing agent and ask about the condition of the home pre-flip.  I'd ask the flipper to share any inspection reports that they obtained during their purchase, along with any disclosures that the seller made. 
I'd check with the local building authority, and see if there were any violations posted against the property in it's previous ownership, and see if any building permits were pulled by the flippers.
I'd inspect EVERYTHING.  I don't mean some yahoo inspector that took a correspondence course.  I mean an engineer/GC type to go over the house with a fine-tooth comb.  I'd recommend a roof inspection (by a roofing contractor), a sewer camera, an electrical inspection by a licensed electrician, etc.  Y'all have some foundation issues, so I'd have a laser inspection done of the foundation. 
 

Lol. Pretty much everything is going here in Scottsdale with no inspection or appraisal contingency. Lots going without even an inspection period. And over list usually. Something like 20th month in row we’ve led the nation in house price growth rate. Competitive AF.
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  On 2/10/2022 at 8:17 PM, tbone_ said:

Different markets I guess. But it’s happening here.

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I'm sure that it's happening here too, but it's stupid.  

Buyer's investigations are actually GOOD for the seller.  If the seller fails to disclose some defect or condition, and it's discovered by the inspector, then the seller's failure to disclose didn't harm the buyer.    And in CA anyway, seller disclosures are required by statute.   

 

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Our former neighbor sold his house to a flipper and had to be out by 12:00am on 1/1/21. That was a sight to behold.

Five or six months of construction immediately outside my home office, had the gall to list it for fucking $800k in Houston. Doesn't even have gutters, raccoons have a vacation home in the backyard. Has proceeded to sit on the market for eight months and dropped into the 600's. Just removed the listing the other day and seems like they've got more workers coming out again.

Same guy bought a house in worse shape - we're talking barely habitable, if at all - across the street and was able to flip it in the 600's. Basically identical houses now, not sure what gives.

So this hits close to home.

I would probably never touch a flip. I'd rather buy a fixer upper.

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  On 2/10/2022 at 9:41 PM, Gil Bang said:

I'm sure that it's happening here too, but it's stupid.  

Buyer's investigations are actually GOOD for the seller.  If the seller fails to disclose some defect or condition, and it's discovered by the inspector, then the seller's failure to disclose didn't harm the buyer.    And in CA anyway, seller disclosures are required by statute.   

 

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Same in Texas (disclosures required) and yes, an inspection can break the chain of causation between a fraudulent or inaccurate disclosure notice and a defective house.

Won summary judgment for a client on a $1.5M claim 20 years ago on that exact ground.  The inspector didn't find the exact foundation defect (the central beam in the house was spec'ed as 3 2x12 parallams, was built with 2 and "patched" with a third, yielding a pretty good deflection running right down the middle of the house.  But he noted some of the deflection, putting the buyer on notice of the problem.

For many practical purposes, if you get an inspection and buy, you've bought "as is."

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  On 2/10/2022 at 8:06 PM, Gil Bang said:

I'm shortening the contingency periods on all of my offers, but there's no way I'd allow a buyer to waive inspection altogether. 

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We lost a house that we offered 25k over asking, but it had a pool, and I wanted a regular inspection, pool inspection, and structural engineer inspection, so asked for a 10 day option (right before the latest big freeze that shut everything down for 2 days).

The fucking seller wanted a 90 day leaseback, too, but close ASAP.  What the fuck.

Lost to a 5-day option period (with 2 at least sucked up by the weather).

That particular house had been flipped, but like five years previously, so any bullshit presumably "showed through."

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  On 2/11/2022 at 4:57 PM, Nice Guy Eddie said:

In watching some of those flipper shows on HGTV, I would be afraid to touch one. I know those shows are basically scripted but they always find a big problem and then cheaply repair/hide it.

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I'm fine mostly with  cosmetic upgrades, floors, counters, cabinets, etc.  But when they start moving walls around (fairly common to get big bedrooms/baths) or adding a second floor, on a slab, I get a mite nervous.

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  On 2/11/2022 at 4:15 AM, gmr548 said:

Our former neighbor sold his house to a flipper and had to be out by 12:00am on 1/1/21. That was a sight to behold.

Five or six months of construction immediately outside my home office, had the gall to list it for fucking $800k in Houston. Doesn't even have gutters, raccoons have a vacation home in the backyard. Has proceeded to sit on the market for eight months and dropped into the 600's. Just removed the listing the other day and seems like they've got more workers coming out again.

Same guy bought a house in worse shape - we're talking barely habitable, if at all - across the street and was able to flip it in the 600's. Basically identical houses now, not sure what gives.

So this hits close to home.

I would probably never touch a flip. I'd rather buy a fixer upper.

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It's pretty disgusting.  You'll see a house that 3-4 years ago was nice, if a bit dated, owned by an older couple or widow(er) on the tax rolls at $350k.  Flipped and on the market for $750k.  Part of that is just the fucked up market, of course.

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Yeah, a LOT of homes out here are bought and flipped.  And the quality of work done by the flippers varies greatly.  I would definitely confirm the flipper pulled a permit if there was anything but light cosmetic work.  With permit times being what they are, a lot don't.  You can't cut too many corners when you're work is being inspected.

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  On 2/11/2022 at 5:35 PM, Sbbruin said:

Yeah, a LOT of homes out here are bought and flipped.  And the quality of work done by the flippers varies greatly.  I would definitely confirm the flipper pulled a permit if there was anything but light cosmetic work.  With permit times being what they are, a lot don't.  You can't cut too many corners when you're work is being inspected.

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Unpermitted work is an item on the Sellers Disclosure here.  Doesn't stop em from lying, though, and probably a little harder to figure out than some other things.  

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  On 2/11/2022 at 5:28 PM, TwiceHorn said:

 

The fucking seller wanted a 90 day leaseback, too, but close ASAP.  What the fuck.

 

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90 days is a bit extreme but there are a lot of people wanting 1-2 month leasebacks as they are selling and then beginning to look for something to buy...and they are getting hung out to dry in a lot of circumstances because cash isn't necessarily king any more with just about every offer waiving the appraisal requirement

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  On 2/11/2022 at 6:30 PM, Catpfish said:

90 days is a bit extreme but there are a lot of people wanting 1-2 month leasebacks as they are selling and then beginning to look for something to buy...and they are getting hung out to dry in a lot of circumstances because cash isn't necessarily king any more with just about every offer waiving the appraisal requirement

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As a cash buyer, I am finding this out.  Appraisal or inspection?

Fuck that, if I have to waive inspection, I ain't buying.  

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  On 2/11/2022 at 5:35 PM, Sbbruin said:

Yeah, a LOT of homes out here are bought and flipped.  And the quality of work done by the flippers varies greatly.  I would definitely confirm the flipper pulled a permit if there was anything but light cosmetic work.  With permit times being what they are, a lot don't.  You can't cut too many corners when you're work is being inspected.

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  On 2/11/2022 at 5:48 PM, TwiceHorn said:

Unpermitted work is an item on the Sellers Disclosure here.  Doesn't stop em from lying, though, and probably a little harder to figure out than some other things.  

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Considering that most cities in CA want a permit for EVERYTHING, it's a safe bet that the average house will have unpermitted work.   Now, whether that's an issue is another matter.   

In my city, I'm supposed to pull a permit when I replace a water heater.   Number of water heaters I've replaced here?  2.   Number of permits I've obtained?  Zero.   I've replaced/upgraded my sliding doors and many of my windows without getting a permit too.  I've replaced all of my windows and doors with "new construction" stuff, not retrofit, but this city even requires permits for retrofit windows.  

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  On 2/11/2022 at 11:16 PM, Gil Bang said:

 

Considering that most cities in CA want a permit for EVERYTHING, it's a safe bet that the average house will have unpermitted work.   Now, whether that's an issue is another matter.   

In my city, I'm supposed to pull a permit when I replace a water heater.   Number of water heaters I've replaced here?  2.   Number of permits I've obtained?  Zero.   I've replaced/upgraded my sliding doors and many of my windows without getting a permit too.  I've replaced all of my windows and doors with "new construction" stuff, not retrofit, but this city even requires permits for retrofit windows.  

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Most cities require a permit for anything over $500, which is ridiculous.  But if there is any structural work (walls moved, major electrical, etc) a permit should be in place.  Certainly for any additions need to be permitted to get the benefit of the added sf.

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  On 2/10/2022 at 7:02 PM, tbone_ said:


Lol. Pretty much everything is going here in Scottsdale with no inspection or appraisal contingency. Lots going without even an inspection period. And over list usually. Something like 20th month in row we’ve led the nation in house price growth rate. Competitive AF.

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Here in my neighborhood the only way you're buying a home with an inspection contingency is by adding $50k to your final offer. Way too many buyers out there willing to buy sight unseen. Wild shit.

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  On 2/13/2022 at 12:34 AM, HRSchenker said:

Here in my neighborhood the only way you're buying a home with an inspection contingency is by adding $50k to your final offer. Way too many buyers out there willing to buy sight unseen. Wild shit.

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It is, in my humble opinion, outrageous that my profession has allowed this horseshit to become the new "normal".   This is bad.  Really bad. 

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yeah, and buyers and sellers look to us for advice, and it's obvious that most of us aren't saying "are you out of your fucking mind?"

As stated above, I'd advise all of my sellers to require a buyer's inspection.  Because otherwise, my seller has a high probability of being sued.  

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