Questions About Today’s Real Estate? Ask Phyllis!

Buying A Flip

Dear Phyllis,
I really appreciate your take on the real estate market and have a new topic for discussion. My son will be relocating to the Foothills soon and has been working with his Realtor, who sold his home. As prices have risen dramatically since he left, he won’t have many options. One of the homes he found online and sent to his Realtor was a flip. His Realtor does not advise him to buy a flip because he says, typically, the quality is poor. Although he is loyal to his Realtor, I hope I am not imposing for asking your opinion.
Mama Bear

Dear Mama Bear,
This is a great topic! Often, shortcuts are taken when a property is being flipped. They typically look all shiny and new but frequently have underlying issues. Sometimes, the issues don’t come to light during an inspection and aren’t known until the buyer moves in.

It makes sense that when remodeling for yourself, one would typically use the best quality and materials as their budget allows. But the point of a flip is to maximize profit. Past issues my clients have encountered have been windows that were not properly sealed. Inspectors typically don’t inspect sprinklers, which are often not working properly. We also had a client with a problem with an incorrect dishwasher installation that didn’t come to light until they used the appliance several times. If your son opts to buy a flip, have his agent ask for copies of all warranties (windows, appliances, etc.)

There are two types of flips. One is when a home is listed and an investor purchases it. In this instance, it is wise for the buyer’s real estate agent to ask for the disclosures from the previous sale. The more information the buyer has, the better.

The second instance is when the investor buys the home off the market. I have encountered this scenario several times where the investor claims no disclosures were provided to them by the previous seller … even though California law requires disclosures in every residential real estate sale. In these escrows, I had the seller’s real estate agent state in writing there were no disclosures provided at the time of their purchase.