Buying A Flipped Home
If you’re interested in buying a home make sure you do your due diligence, especially if the home was “flipped”. The home you’re interested in may have had a “surface job” for a quick flip, or the flippers dug deep and did a wonderful job.
Flipping houses has been so popular the last ten years. There were so many foreclosed and vacant properties for sale at rock bottom prices, experienced and non-experienced investors were buying them up like candy.
Contracting for flipping a residential property is a largely unregulated industry. Inexperienced, first-time flippers interested in making a quick buck could make you pay dearly after the sale. Even an experienced contractor can miss hidden problems.
When buying any home, flipped or not, it’s best not to focus on a detail you love or cosmetic designs. Flippers generally target kitchens and bathrooms as the areas to update and ‘make pretty’. Buyers attracted to these areas may not pay that much attention to the rest of the home.
Go through the house with a cynical and critical eye. Check all the appliances, faucets and light fixtures to make sure they work. The ‘new’ appliances may be refurbished. Does the broiler work inside the stove? Is the freezer in the refrigerator not that cold? Check every faucet and run the water. Is there hot water? Are there any plumbing leaks? Look for any new plumbing work, especially under sinks. If only part of a pipe was replaced you may be paying for the rest of that pipe after you buy. Check the appliance date on the water heater. Test all light switches, overhead lights and fans. Any switches not working? Is the circuit breaker box and panels in order?
Look for differences in materials. Is there a section of a wall that looks different? Are pieces of the baseboard new? These areas may have had termite, water or mold damage. You need to ensure there isn’t extended damage beyond what you see on the surface.
No one likes to climb up into an attic, especially in hot or cold weather. The attic can hold clues to other problem areas that may be lurking behind that new drywall. Roof leaks, faulty wiring or bad insulation may be hiding in that attic as well.
Inexperienced or unscrupulous flippers may try to hide serious and expensive problems. If additions were made, there could be major structural problems.
If you’re not sure a house was flipped, check your county records. Was the home bought at a low price a few months ago and now selling at a much higher price? Have the sellers sold other homes? If they have, contact those buyers and ask if they encountered any problems.
Get disclosure statements on all the upgrades. Ask the sellers to list all the work they did on the house. Pull all the permits on the house, get receipts and warranties on appliances and other new items and make sure you had a thorough inspection.
Colorado state statutes require sellers of residential property to disclose certain conditions on the property being sold. There are also certain federal laws sellers have to disclose. Failure to comply with seller disclosure laws could result in the seller being held liable.
Think about retaining an experienced real estate attorney to negotiate and resolve any issues. Your attorney can review your contract, resolve disputes, breaches or title defects, advise and help you with any negligence issues, non-disclosure issues, permitting, variances, liens and conduct due diligence.
A real estate attorney can also advise on purchasing a home to flip, or selling a flipped home. If you have questions or issues regarding tax implications or a trust for your real estate property or profits, you should speak to a tax attorney and trust attorney. Gantenbein Law Firm's attorneys are experienced in all real estate, tax and trust issues. For more information, call 303-618-2122.
Thinking of buying a flipped home? Have questions regarding the tax or real estate legal issues regarding flipped homes? Want to put your profits in a trust? Worried about construction defects or non-disclosure issues?
Gantenbein Law Firm can help with all of that.