I found a house that was flipped. The house is built in 1920, will the age of the home be an issue? and is buying a flipped home risky?

Asked by Jenny, Los Angeles, CA Sun Feb 12, 2012

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12
Meredith McK…, Agent, Pasadena, CA
Mon Feb 13, 2012
Dear Jenny:

I agree with most of the comments below and offer some additional tips, since one of my buyers and I just closed on a 'nightmare' flip property.

In addition to having an inspector evaluate the property, keep in mind the following:

1. The 'flipper' may not have pulled permits. It's easy to check. Since you state you are a homebuyer from Los Angeles, go to the LA Dept of Building and Safety website which has lots of great information, including permit application updates and certificate of occupancy verifications. When we did our original research, we found that permits had been pulled but that a Certificate of Occupancy had not been issued. The C of O is the critical document you want to have; anyone can pull permits.

2. Review a COMPLETE title report, not just a property profile or a preliminary title summary. When we looked at ours, we discovered that the City of LA had filed a 'substandard lien' against the title. This type of lien can only be removed by completion of the remediation work AND the City approval of the C of O.

3. As noted previously, if this is an investor flip, your lender will not approve a loan unless that 'flipper' owner has owned the property for at least 90 days, so you'll want to verify that information as well.

4. Since the property was built in 1920, depending upon what the fliipper has done, you may have an insurance issue. Most insurance companies are hesitant to insure properties unless all systems (electrical, plumbing, heating) have been updated to current code. In fact, the insurance companies my clients chose on my last three buyer transactions actually sent an agent out to see the interior of the house before agreeing to underwrite a policy on it.

But there's good news, too! The seller's contractor on our 'nightmare' flip property actually did good work to current code. So our 'nightmare' was mostly patiently waiting through a long escrow while the seller obtained the C of O and got the substandard lien released. That patience was also rewarded by closing below current market value, since competing buyers disappeared when they became aware of the issues.

As you can see, flip homes can be great opportunities and values as long as you know what to look out for.

Good Luck and make sure to get a knowledgeable agent who is a strong negotiator to represent you.

Best,

Meredith McKenzie
DRE Broker #01142186

Keller Williams Realty
1660 Hillhurst Avenue
Los Angeles, CA 90027

323-300-1110 - Direct
323-300-1001 - Fax
323-230-9749 - Cell

http://www.losangelesriverrealestate.com
1 vote
E. Lynn LeGl…, Agent, Los Angeles, CA
Mon Feb 13, 2012
Hi Jenny,

1. Get a great inspector. 2. Check to make sure th ework was done with permits. 3. Speak to your lender if the flip was done very quickly. 4. If all goes well, enjoy your beautiful house.

Lynn Le Glaire
Keller Williams Realty
1 vote
Carrie Rolli…, Agent, Los Angeles, CA
Sun Feb 12, 2012
Hi Jenny,
You will want to look into permits; buying a flip house can be great, but you want to make sure that the work done was properly permitted.
Finally, if the flip was done too quickly, before 90 days, this may effect your loan. Consult with your lender on this issue.
Best of Luck,
Carrie Rollings
1 vote
Dorene Slavi…, Agent, Torrance, CA
Sun Feb 19, 2012
Dear Jenny,
It depends upon how professional the flip was done and if the work was done by licensed contractors and trades persons. I have seen some pretty poor work in standard homes, not to mention what goes on in "flips".
If you are not experienced at detecting defects, hire an excellent inspector and pay extra to have them go over all areas including the garage. That should give you an idea of what you are getting yourself into and you can then make an informed decision about the purchase
0 votes
Kathleen Bec…, Agent, Santa Monica, CA
Tue Feb 14, 2012
Hi Jenny:

Purchasing a house that has been flipped is just like purchasing any other house. The age of the house will also be an eye opener...due to possible deferred maintenance and the life span of the house and materials used.

When you purchase a home, regardless if it was flipped or not, and the age, your biggest priority is to make sure you do your physical inspections including looking at all permits for the property, having a termite inspection done, inspection of the plumbing, electrical, HVAC, roof, foundation, geological, mold, zoning and any other inspection that may be required. These inspections will let you know what you are getting into and when you do your "due diligence" during your contingency period, if you find something major, it gives you the ability to negotiate repairs or a credit for repairs or back out of the deal.

So, no matter what property you want to purchase, do your inspections and due diligence.

Good luck to you.

If I may be of service, please feel free to contact me directly.

All the best, and Good Luck!

Kat Becker, Realtor
Prudential California Realty
katbecker@prula.com
0 votes
Jeffrey White, Agent, Beverly HIlls, CA
Sun Feb 12, 2012
There are a few very important things to consider when buying a flipped property and they have both already been mentioned. You will need a great inspector and you will need to speak with your lender about obtaining financing if the flip was done in 90 days or less.

In addition to these two tips, there is another big one. Make sure you get confirmation from the city that all permits have been finaled for the work that was done. The companies and designers that flip homes often are so busy with multiple projects that they can forget this final step and it is a costly one if you end up having to get them finaled after the fact. You can easily look this up online. Also make sure they have applied to have them finaled in time for your closing date.

In general, use the same approach you would with purchasing any property. Buyer beware, investigate, investigate, and surround yourself with experts in their respective fields that you can rely on. Do this and you can't go wrong.
0 votes
Harold Sharpe, Agent, LAKE HAVASU CITY, AZ
Sun Feb 12, 2012
Jenny,
Flipped homes.
Use caution.
Many homes that are flipped are what I call cosmetically fixed.
That means some items get painted over and covered.
Usually there isn't much in the way disclosures as well.
I would door knock the neighbors and see what they know about the house if anything.

Harold Sharpe - Broker
So Cal Homes Realty
(951) 821-8211
harold@socalhomebuying.org
http://www.socalhomebuying.org
California Department of Real Estate Broker License # 01312992
0 votes
Lee Fruchter, Agent, Glendale, CA
Sun Feb 12, 2012
You got some good answers here. There no such thing as a licensed home inspector. Home inspectors are not licensed by the state. Generally, it is best to get a home inspector that has a general contractor's license and he or she has a lot of experience in inspecting residential properties. Yes, you have to think about deferred maintenance, permits, and getting a loan on a flipped property.

Good luck,


Lee
Web Reference:  http://www.homesbylee.com
0 votes
Douglas Perez…, Home Buyer, Los Angeles, CA
Sun Feb 12, 2012
Q&A 1.) The age could be an issue if maintenance has been deferred. Make sure to get licensed home inspectors to address items like electrical, plumbing, sewage line, termite, roof, bolted foundation, etc.

Q&A 2.) Buying a "flipped" home could be risky if inspections are not reliable or waved including building permits.

Do you have an agent to represent you?

Doug Perez
(323) 285-8864
0 votes
Clint Lohr, Agent, Glendale, CA
Sun Feb 12, 2012
Hello Jenny,
The age of a "flipped" house is often irrelevant because the last owner usually has put a lot of renovation into the house to turn around and sell the home at a profit. Often, the kitchen and bathrooms have been remodeled, and the electrical system and plumbing have been upgraded. In the purchase contract, the buyer is advised to get their own professional home inspection to uncover any defects in the property before the purchase is completed. Please e-mail me ,rholcwl@pacbell.net if you would like to talk further.
0 votes
Elizabeth La…, , Marina del Rey, CA
Sun Feb 12, 2012
Hello LA hombuyer! Your home inspection will address both your concerns. I live in a 1926 home and have assisted many buyers in a 'flip' purchase. Good luck!
Web Reference:  http://www.Agentlayne.com
0 votes
Brian Byhower, Agent, Hermosa Beach, CA
Sun Feb 12, 2012
Jenny,
Any house you buy can be a risky. I don't think the age of the flip home really makes a difference as long as it has been upgraded, with newer electrical, plumbing, etc. As with a home purchases, make sure you get a home inspection and make sure the inspector is a licensed home inspector and/or licensed contractor. The inspector will find any flaws that need to be addressed, prior to be locked in to the purchase contract. I hope that helps.
0 votes
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