What to Know Before Buying a Flipped Home: Tips from a Real Estate Agent

Are you considering buying a flipped home? As your trusted real estate agent, I want to help you make an informed decision. Flipped homes can be a great opportunity to purchase a beautifully renovated property, but they also come with unique risks. Let’s break it down so you can protect your investment.

What Is a Flipped Home?

A flipped home is a property that has been purchased, renovated, or remodeled, and then listed for sale at a higher price. Typically, these homes are purchased by investors who aim to improve them quickly and sell for a profit. While many flipped homes can be stunning, it’s important to keep in mind that not all flippers prioritize quality workmanship. Some may rush the process to move on to their next project, potentially leaving behind subpar work.

What to Consider Before Buying a Flipped Home

1. Learn About the Flipper

Not all flippers are created equal. There are some high-quality flippers who take pride in their work, and others who cut corners to maximize profits. When considering a flipped home, ask me to help you gather information about the flipper. Here are some key questions to ask:

• Is this their first flip, or do they have experience?
• Which contractors did they hire for the renovations?
• What materials were used during the remodeling?
• What specific work was completed?

Reputable flippers often have a track record that speaks for itself. Don’t hesitate to ask for references, and even speak to neighbors to learn more about their reputation. Quality flippers will also provide proper disclosures, permits, documentation, and warranties for their work.

2. Get a Home Inspection

Never skip a home inspection—even for a newly renovated home. While a flipped home might look flawless on the surface, underlying defects could exist. Since flippers don’t typically live in the homes they renovate, they may not be aware of hidden issues. A qualified home inspector can thoroughly evaluate the property, checking everything from the roof to the foundation. This step is essential to ensure you’re not purchasing a home with costly problems.

3. Research the Property’s History

Many flipped homes were previously foreclosures or bank-owned properties. These homes are often unoccupied for long periods, which can lead to issues such as burst pipes, mold from moisture buildup, or pest infestations. Understanding the prior condition of the home can give you valuable insight into potential risks.

4. Verify Permits

For any major work—including electrical, plumbing, HVAC, and structural changes—permits should have been pulled and signed off by the city. The seller should be able to confirm work was done with proper permitting.   If we are unsure, you check with the local building department to ensure all permits were pulled and finalized.  If you buy a home with unpermitted work, the city could require you to redo the renovations properly, which could be an expensive and time-consuming process.

Proceed with Caution

While flipped homes can offer modern features and stylish upgrades, it’s crucial to approach the process with caution. By doing your homework and asking the right questions, you can avoid potential pitfalls and make a sound investment.

If you’re thinking about buying a flipped home, I’m here to guide you every step of the way. Contact me today with any questions or to start your home-buying journey!

As-Is Properties: What Does That Mean?

While looking for homes, buyers will sometimes come across a property listed “as-is” or have to make an “as-is” offer to get a home they love under contract. So what does as-is mean exactly?  An as-is offer means you can have an inspection, but you are not supposed to ask for any concessions, repairs, credits, or price reductions based on the inspection results – what you see is what you get. There are some safeguards to protect you when purchasing an as-is property.

Should I have an inspection?  

As a buyer, you have the opportunity to have an inspection during the inspection period and you should.  After all, you did not waive inspections.  In Indiana, we use an as-is addendum that is provided with an offer spelling out the timeline and terms of an as-is purchase. A defect in Indiana is, in short, defined as a condition affecting the health or safety of inhabitants or significantly shortening or adversely affecting the life of the home.  If a defect is revealed during the inspection that was not previously disclosed, you have the opportunity to walk away from the sale and request a refund of earnest money.  Typically, when a buyer goes into an as-is situation they know what they are getting into minus what isn’t easily determined in a walk-through of the home unless the seller has provided an inspection.  In some cases, there are more defects revealed than the buyer is comfortable addressing or can address due to budgetary constraints.  

Should I provide an inspection response?  

If you find that the number or magnitude of defects is too great to address and that has changed your desire or ability to purchase the home, then I suggest providing a response.  If the situation is too extreme and you don’t want the home, then walk away as the as-is addendum provides for that.  However, if you still want it, but are not willing to move forward at the agreed upon terms then I recommend providing a response.  If the seller is not willing to consider the response, then they can terminate the contract on their own accord and must return the earnest money to you per the language in our as-is addendum.  The reality is that whatever is causing you to want to walk is likely going to be something that will now have to be disclosed to future buyers and it may be worth it to the seller to preserve the deal in hand.  Sellers still need to disclose any and every issue with the house, regardless of the as-is sale.

Is an as-is sale for me?

As-Is properties can sometimes be a good deal, but if you don’t have a good handle on what the costs are to make repairs or updates that you think need done plus some extra cash for unforeseen items that come up on an inspection, this may not be for you.  You need to ask yourself how comfortable you are with an as-is offer knowing a seller is not planning to address or share the cost of inspection items.  The idea is that the price is such that it is accounting for the work that needs done.  Not every buyer has the stomach for this, emotions can get in the way of whether you should move forward.  Buyers ultimately have the power to pull the plug on as-is deals with little to no consequences.  Like I tell my sellers, it’s not always the best path if you want to get to closing.  I have tips for sellers that I share to minimize the risk of an as-is deal.  

Please let me know if I can answer any questions about “as-is” sales!

When buying a home, many buyers think they only need to have a down payment ready for closing, however, there are many other fees that have to be paid throughout the process.  So what are these other costs, when are they due, and how can you prepare for them?  Look for a separate post touching on inspections for vacant land.

Appraisal: Typically the appraisal is around $450 to $550+ and is paid to the lender at closing, but some lenders do collect that payment upfront.  A few questions you might have: What happens if the home doesn’t close?  You will most likely still have to pay for the appraisal if it was completed.  Do I have to pay for the appraisal if it comes in less than the purchase price?  Yes.  No matter what the value is, if the work has been done the appraiser will be due their fee. 

Home Inspection:  I always recommend buyers do a home inspection on a property. These may range from $350 to upwards of $750 based on the size of the property.  If you tell the inspector the size of the home, they should be able to give you a quote over the phone. The inspector will collect the fee for the inspection at the time of inspection.

Additional Inspections:  I often recommend clients do additional inspections on top of the general inspection.  It depends on the property you are purchasing if and which of these I would recommend. Typically these inspections are done on the same day as the general inspection and are paid for that day:

        Radon – Radon is a naturally occurring gas which could pose a health hazard if the levels are at or above 4 pCi/L according to the EPA.  This is a very common test in our area.  Your inspector will run this test for 48+ hours and then will check the machine’s readings to determine if the levels are safe. The cost for this is $100- $250.

        Wood Destroying Insects/Termites –  Checking for signs of insects that could cause major damage to your home is very common.  This includes: termites, carpenter bees, carpenter ants and powder post beetles. Prices range from $75-$150 depending on the size of the home.

        Septic –  If you are buying a home with a septic system you can have the local health department perform a visual inspection for $100 (plan ahead as this will take several weeks) or you can hire a septic company to pump then inspect.  I will ask for info from the current owners on the septic maintenance.  Start with your home inspector and see if they will conduct a dye test that might cost @$75.  Then go from there depending on the findings, etc…

        Sewer scope – Usually done on inspection day if there is access to the sewer.  The costs could be $150 – $500 (may depend on where, how much length, amt of time it takes and/or if there is a clog that needs cleared first). This will help determine if the lines are clear or not.  Especially good to do if there are large trees on a small property – think Elm Heights area, smaller lots and huge trees with major root systems.

        Pool, Water, Indoor Air Quality, & Mold – These are some additional add-on tests.  These are not as common.  If you have well water though, you will want to have the water tested. 

Closing Costs:  When you close on your home or land you will then pay closing costs and prepaids on top of your down payment. Closing costs are typically 2% to 3% of the purchase price and likely include the appraisal as well as title co fees, lender fees and more. You’ll also likely need to pre-pay 6-12 months of your homeowners insurance or HOA fees. Your lender is going to be your best resource for those fees and will explain what you will need to bring to closing in terms of cash that you wire. If you are paying cash, the cost to close at a title company is going to be around $550 and then you may need to pay pre-paids.  You won’t have loan closing fees or an appraisal fee due at closing.  Remember, your earnest money is credited back to you at closing and most buyers get a credit from the sellers for future taxes, so those often offset a chunk of these costs.

If you have any questions about how much money you need to have to buy a property, please let us or your lender know!