Turnkey or Turkey? Should You Buy a Flipped Home?

Turnkey.  It’s a term that is on a lot of buyer’s must-have lists.  Not everyone has the stomach – or the cash – for a home renovation. A home where someone else has done the work; where all you need to do is turn that key in the front door, is very appealing.  If turnkey is on your list, you might be considering purchasing a home that’s been flipped. There are a lot of pros to purchasing a flipped home. There can be unexpected repairs that come up when you take a house down to the studs, and in the case of a flipped home, some of those big problems have already been addressed.  Additionally, because the market determines the price of the home, you’re still likely to get a competitive price.  Since the onus is always on the buyer to investigate the home, there are a few important questions to ask before purchasing a flipped home.  1. Who is the Seller? Is it an individual or an LLC? That is a question every buyer should ask. Some people use a one-off LLC to purchase a home, renovate and then re-sell. After the sale, that LLC can be liquidated, leaving you, the buyer, with no recourse should you find defects in the property after the fact. Not all LLCs equal bad news. One way to tell an unscrupulous seller from another is to investigate how long the LLC has been in existence, and how many other properties it has sold. One with a longer track record would indicate it will continue to stick around.

2. What was the Scope of the Renovation? A lot of flipped homes have a lot in common: focus on kitchens and bathrooms with trendy flooring, cabinetry and tile. But don’t be blinded by those gorgeous light fixtures. Ask whether any walls were removed, what work was done on the electrical and plumbing, and how old is the roof and HVAC system? Those items can be very costly to repair should anything go wrong. 3. Was the Work Permitted? Permits take time and money to obtain. Some less scrupulous investors will cut corners by not getting the appropriate permits. If any major electrical, plumbing or structural work was done, you should investigate whether it was permitted. Don’t just ask the agent or the seller. Go one step further and visit the city’s Building & Safety office and find out what permits are on file. It’s free of charge, and only costs you a little bit of time. You can also access this information online for a small fee. 4. What Changes were Made Outside? Problems in the yard can be pricey as well. Does the home have a pool? Older pools might have cracks or old equipment. What about uneven concrete from large tree roots? How is the fencing? Did the flipper address all of the potential problems outside of the home, or did they just focus on the finishes inside? Attention to detail – both inside and outside the home – indicates a more thorough job. Now that you’ve investigated all of the above, it’s time to hire a licensed home inspector to perform a thorough inspection of the home.  Just because the work was done with permits and the seller paid attention to details, you should never forego the professional inspection.