Is that house you’re considering a flip? Here’s what to know

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Not all houses are created equal. In any given price range, every property you’re going to look at will have its pros and cons. This applies even more so if you’re considering a home that was recently renovated by a flipper.

You certainly don’t need to avoid properties that are being flipped, but there are some things to watch out for if you’re looking at one.

What is house flipping?

House flipping is hardly new — in fact, Bankrate wrote a whole guide on how to do it a few years ago. But as real estate prices skyrocketed over the last 12-18 months, many people saw an opportunity to earn a quick buck by buying property, fixing it up, and reselling as the market pushed the value ever higher.

Experts warn that flipped houses can sometimes be more trouble for the post-flip buyers, however, especially at lower price points.

“There’s always been an issue with fix and flips with the quality of them,” said Stephanie Fix, a Realtor with RE/MAX Professionals in Denver. “The margins are so slim these days with these investors that they’re really cutting a lot of corners.”

That reality came to the forefront recently as Zillow exited the home flip market. The online real estate giant made a big push to boost its iBuying platform in the last year, but ultimately decided it overpaid for too many properties and went into loss-cutting mode earlier this month.

Flip warning signs to watch out for

Fix said that a shoddy flip isn’t always obvious, but finishes that seem off can sometimes point to bigger construction quality problems.

She said she recently toured a house that she could tell was flipped because a kitchen drawer was blocked by the refrigerator and the dishwasher wasn’t installed properly.

“If those things are missing, cosmetic, on the surface that I mentioned, that tells me to be wary of what’s behind the walls,” Fix said. “Most of the things that are dangerous, you can’t always see with your eyes.”

Alterations that seem rushed on the surface could indicate bigger problems, like electrical work that isn’t up to code or plumbing that wasn’t installed correctly. Addressing issues like that can become costly, especially if you haven’t factored them into your budget.

What to do if you’re buying a flipped house

It’s crucial to work with a knowledgeable Realtor if you’re considering a house that’s being flipped, Fix said.

“An experienced agent is probably going to have a better eye than the buyer,” she said

When she tours a house that she suspects is being flipped, she’ll check the title’s chain of custody to see who owned the home previously, and will reach out to other agents in her network to see if anyone has experience buying from the flippers.

You can easily tell if the home is a flip by looking at the property records. If the home is back on the market just a few months after being purchased by a new owner, odds are it’s a flip.

At the height of the pandemic real estate boom, many buyers were waiving inspections and other contingencies in their contracts to make their offers more attractive. Fix said that’s an especially bad idea on flipped properties.

“These guys typically don’t permit things,” she said, so getting an experienced inspector to go take a thorough look at the property is crucial. “It’s going to be really important to do your sewer and separate roof inspections.”

Bottom line

Flipped houses may seem up-to-date on the surface, but shiny new finishes can sometimes mask shoddy work. If you’re looking at a property that is being flipped, you’ll want to be sure to get it thoroughly inspected before you close, and set aside money for any problems that may crop up as a result of renovations that were done on a tight budget.

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Written by
Zach Wichter
Mortgage reporter
Zach Wichter is a mortgage reporter at Bankrate. He previously worked on the Business desk at The New York Times where he won a Loeb Award for breaking news, and covered aviation for The Points Guy.
Edited by
Senior mortgage editor