When is the right time to buy a flipped home? Across the country, real estate investors are searching for foreclosed homes and other distressed properties - looking to buy while the prices is cheap, make quick renovations, and then sell again - all to make a profit.
However, what does that mean for homebuyers? The sellers of flipped homes often haven't lived in them, which means that they might not know a lot about the home. The price point could be ideal, though, making it a potentially smart financial decision. Given the level of risk, a home inspection is always a must for anyone looking to buy this type of property.
Foreclosures lead to flipped homes
The main type of house that ends up getting flipped is a foreclosure. The reason is that few real estate investors can find a better deal on properties, and their goals include making money. The cheaper the home, the easier it will be to renovate and re-sell.
In total, there were 128,560 properties across the U.S. that were filed for foreclosure in August, according to RealtyTrac. That number has dropped slightly, but there are still a large number of bank repossessions - up on a monthly basis.
For the average buyer, this means that there could be more flipped homes for sale over the next year or so. For many people about to begin shopping for real estate, it pays to do research and be smart about every type of property, including flipped homes.
Michael Mahon, executive vice president and broker at Ohio-based HER Realtors, explained to the news source that a lack of inventory in the summer means a high buyer demand for new inventory in the market. Foreclosures might provide those homes for sale.
What to look for in a flipped home
If any buyer is looking at a flipped house as their next purchase, they have to be smart. A property inspection is crucial, and poor renovations and sub-par quality might be a legitimate concern.
For starters, buyers have to determine which contractor performed the upgrades, according to MarketWatch. If the company has a good reputation and has been known to perform solid work, there is less for buyers to worry about. After that, a licensed home inspection professional should be brought in, to clarify any areas that could pose problems.
In addition, structural weaknesses might also be an issue in a flipped home, the news source noted. Warning signs include cracks outside and inside the house or uneven floors. Any repairs that look like they weren't performed well could be an indicator that other, more serious improvement flaws could exist.
Moreover, a roof repair is a costly proposition. Many home flippers have this replaced if they bought the home in bad condition, but one location that could have been neglected is the roof decking, according to Benzinga. This is the area underneath the shingles, and covering up concerns here equals nothing more than a cosmetic fix. A home inspection should help clarify any concerns, however.
The heating, ventilation and air conditioning are also components that should be double checked when buyers are looking at a flipped home, the news source noted. The age of the units are important, and replacing them comes at a large price. The electrical system and wiring is another good place to check. Buyers shouldn't assume that this area is in working order, and it pays to be thorough. Missing a serious electrical problem is a big hazard for a home.
Overall, buyers should do their research about who the home flipper is. If the person has a good track record selling these types of properties, there is less to worry about. A home inspection before closing is also a must, and if a house checks out it could be a great deal.