Reader question: We bought our current home a year ago. We realize houses and their systems are always wearing out, but, in this house, it feels like the repairs and replacements are inordinate. The latest example is electrical. The electrical panel box was new, but we have had several electrical issues. The home inspector said electrical was satisfactory. An electrician determined the house had 60 amp service to a 100 amp panel and said whoever did the work must have known. Now we have to redo the wiring to the house. All these “repairs” since we closed are over $5,000. We suspect the seller was a corner-cutting home flipper. How can we determine if the seller was a home flipper?
Monty’s answer: Besides a home flipper, your description could point to a home seller who knows little about how a home and its components work and watched too much do-it-yourself television. It may be a home seller that knows precisely how a house works and knows how to cut corners. Another scenario is an uninformed homeowner who hired dishonest or unqualified contractors who took advantage of them and, indirectly, you.
Seven tips to identify a flipped home, from my personal experience:
1. A vague seller condition report: Review it very critically; it shouldn’t be perfect.
2. Term of ownership: Seller there for less than 18 months; check on the condition report.
3. Talk to adjacent neighbors: Some are very aware of neighborhood activity.
4. Seller name: A corporation or a limited liability company signs condition report.
5. Multiple properties under the sellers’ name: Register of deeds or title company search.
6. No records of service work: Receipts, invoices or contractor information absent.
7. A financial institution is a past owner: Ask a title company. Likelihood of owner abuse.
A new type of home flipper
A relatively new method for a real estate company to gain market share in some markets is to promote the iBuyer concept. Their pitch is to buy directly from a home seller to avoid the hassle of selling. They state they pay a fair market price, fix up the house with their contractors, and then resell it. They charge a hefty “service fee” instead of a commission and they charge for repairs. Real estate companies have noticed and moved into iBuyer type marketing to protect their market share.
Here is a link to an article that discusses traditional house flippers: https://dearmonty.com/sell-home-flipper/.
The not-so-transparent home flipper
These flippers do not openly disclose they are flippers. These folks are why house flipping has acquired a questionable reputation. If questioned, many will reveal the house is a flip, but many will not. Some flippers will move into the house and fix it up while they occupy it. Flippers often find their leads through working in real estate related businesses. Some home inspectors, real estate agents and building trade contractors will buy a home if they can turn a healthy profit. It is not always easy to identify flipped houses.
Richard Montgomery is the author of “House Money - An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home.” He is a real estate industry veteran who advocates industry reform and offers readers unbiased real estate advice. Find him at DearMonty.com.