Should I Buy a Flipped House? Unveiling the Pros and Cons

In recent years, the real estate market has witnessed a surge in flipped properties hitting the market. These homes, ranging from simple updates like new flooring and paint to fully renovated properties with modern amenities, often exude an irresistible charm. However, behind their polished façade, flipped houses may harbor a host of undisclosed issues, including unpermitted renovations, structural problems, and even health hazards like mold.

Flipped homes have become increasingly popular among buyers seeking move-in ready properties, especially in regions like the Bay Area where aging housing stock predominates. However, the proliferation of flipping enthusiasts, spurred on by promises of quick profits, has led to concerns about the quality and integrity of these renovations.

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Is Buying A Flipped House Worth It?
In recent years, the real estate market has witnessed a surge in flipped properties hitting the market. These homes, ranging from simple updates like new flooring and paint to fully renovated properties with modern amenities, often exude an irresistible charm. However, behind their polished façade, flipped houses may harbor a host of undisclosed issues, including unpermitted renovations, structural problems, and even health hazards like mold. Flipped homes have become increasingly popular among buyers see

The Appeal of Flipped Homes:

It's easy to understand the appeal of a flipped property. These homes offer the allure of modern updates and convenience without the hassle of undertaking renovations yourself. For busy professionals and families, the prospect of moving into a fully renovated home is undeniably attractive. In recent years, there has been a surge in flipped homes. And there is no surprise why. Buyers pay a premium for a nicely updated home, and with all the videos online from these so-called flipping gurus promising amateurs quick and easy money strategies to flip homes and make massive profits, it’s no surprise that there are many flippers out there opting for the fastest and cheapest renovation methods.

Navigating Potential Pitfalls:

Despite their apparent advantages, flipped houses come with their fair share of risks. One of the most common concerns is the quality of workmanship. Flippers, eager to maximize profits, may cut corners or hire inexperienced contractors, resulting in subpar renovations. From poorly installed flooring to hastily patched wall cracks, the signs of shoddy workmanship can be subtle yet costly to rectify.

What Does This Mean for Buyers?

As a buyer, it’s easy to get swept up in the excitement of finding a beautifully updated home. However, the excitement can quickly fade when undisclosed defects surface, leaving you with unexpected headaches and expenses on a home that you likely paid a premium for. Like many agents in our market, one of the services I offer to sellers is helping them renovate their homes to maximize the price when they sell. I am careful to make sure that all the work is of high quality and well-documented, and permits are obtained when necessary. Equally important is that all the information regarding the condition of the home before the work was done, such as prior inspection reports, be disclosed to prospective buyers.

Code Compliance and Safety Issues:

Kitchen remodeling, a staple of many flipped properties, presents particular challenges. Significant electrical and plumbing work is often required, necessitating permits to ensure compliance with building codes. Improperly executed renovations can lead to safety hazards, such as overloaded circuits or faulty plumbing, posing risks to occupants and potentially resulting in costly repairs down the line.

Due Diligence for Buyers:

Given the potential pitfalls associated with flipped properties, prospective buyers must exercise due diligence before making a purchase. Thorough inspections, including scrutiny of permit histories and verification of renovation details, are essential steps in mitigating risks. Working with experienced real estate agents who are knowledgeable about the intricacies of flipped properties can provide valuable guidance and support throughout the buying process.

Here are some key considerations for buyers evaluating flipped properties:

Quality of Work: Assess the craftsmanship and attention to detail in the renovations. Look for signs of shoddy workmanship, such as uneven finishes or patched wall cracks.

Electrical Outlets: Check if the kitchen outlets comply with code requirements, including spacing and placement around kitchen islands.

Electrical Panel: Determine the amperage of the electrical panel to ensure it meets the home's needs.

Permit History: Obtain the permit history of the property to verify that all renovations were conducted legally and up to code. Discrepancies between county records and MLS listings should be investigated further.

These are some quick and easy tips that will help you determine if the work was done with permits or if the sellers cut corners, and more investigation is necessary. Also, understand that not all property inspectors will look for code-compliant problems, and since property inspectors generally perform visual and simple inspections, they may miss issues that may be more involved.

Like many buyers in our Silicon Valley market, if you are just relying on the seller's inspections that may not be enough to protect you. Aside from safety hazards, the risk of unpermitted work falls on the property owner, not the seller. If the unpermitted work is substantial enough, the city may “red tag” the home, preventing any future work until the issues have been resolved.

Legislative Measures to Protect Buyers:

Recognizing the need for greater transparency in the flipping market, lawmakers have enacted new legislation regulating the disclosure of renovation details for flipped properties: Assembly Bill No. 968. Effective July 1, 2024, sellers are required to disclose specific information about renovations completed within the last 18 months, including contractor details and permit status. Why an 18-month rule? The law is specifically targeting properties flipped quickly without due diligence or proper permits, helping buyers and agents spot potential red flags. This legislative intervention represents a significant step towards safeguarding buyers and holding flippers accountable for their actions.

Conclusion:

In conclusion, while flipped houses offer the allure of modern updates and convenience, buyers must approach them with caution. By conducting thorough inspections, verifying permit histories, and working with experienced agents, buyers can make informed decisions and mitigate the risks associated with purchasing a flipped property. While challenges may abound, with careful planning and due diligence, buyers can find their dream home without falling victim to the pitfalls of the flipping market.

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VINICIUS BRASIL, Principal Realtor
Keller Williams Thrive
19900 Stevens Creek Blvd #100
Cupertino, CA 95014
Call Me: (408) 582-3272
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