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House Flipping: Pay Close Attention To Hidden Defects

House flipping: pay close attention to hidden defects

You’ve been searching for the house of your dreams for weeks when you finally find the rare gem: the kitchen has just been renovated to today’s taste, the paint is trendy and the bathroom modern. The mandatory Declarations by the seller form mentioned major renovations were done, but you were far from expecting such a result. But as the old saying goes, if it’s too good to be true … Read our article and see how buying a dubiously flipped house can quickly turn a dream into a nightmare.

The notion of house flipping is to acquire an existing property, to renovate it, then to resell it hoping to derive maximum profit from it. To do this, investors who operate these flips will begin by searching for very cheap houses with high resale potential. And to sell quickly at high prices, nothing’s better than to revamp it by offering it a new and trendy look.

But who are these investors who indulge in this extreme sport? Although there is no uniform profile to represent all of these people, we can at least identify two broad categories. On one hand there are those who have some experience in the field of construction and who have made house flipping a career. They usually have all the right licenses and competency certificates, which gives them credibility. On the other hand, there are the weekend do-it-yourselfers who have some basic notions of construction, but for whom house flips are not a full-time job. For them, it is more a source of supplementary income. In most cases, these two types of individuals are accompanied by interior design specialists whose role is to make the house as attractive as possible at the lowest cost. To facilitate the reading of this article, we will use the term “flipper” to identify all the people involved in house flips, without distinguishing between categories and without negative connotations.

And so the flippers acquire a somewhat derelict house and then begin the demolition. Considering that the quality of the original house often leaves something to be desired, the skills and professionalism of people engaged in house flipping become doubly important. Unfortunately, never lose sight of as the objective of the flip is to derive maximum profit. Since it is not necessary to have competency certificates in the residential renovation industry, it should not come as a surprise if the flippers do not always hire the most qualified workers or the required professionals to fix problems encountered and ensure that they do not come back.

For example, what will our flipper do if he encounters mold inside a wall? The first option is to consult a specialist in the field, to decontaminate the space by following a precise protocol, then to correct all the conditions that allowed the mold to grow in the first place so that the problem does not repeat itself. The second option is to clean the mold and close the wall. And the third … do nothing at all. Given the cost associated with each of these options and considering the primary goal of house flipping, what action do you think is most likely to be taken?

Once the demolition and the small corrective work have been carried out, the flipper goes to the most important stage of his operation: the home staging. In an area where profits are based on minimal investment and a quick sale, the flippers will invest the majority of their budget on the building’s aesthetic. They will replace the kitchen cabinets, remove a wall to create an open living area, build a new bathroom with ceramic shower, paint in trendy colors, etc. Everything is done to lure and entice even the most reluctant of buyers. Putting the house under the best light allows the flippers to dispose of it quickly and thus to avoid depleting their profits in interest on the amount borrowed for the purchase of the building and the cost of the work.

Our role as home inspector and forensic building expert is not to badmouth flippers and put them all in one basket: many are working hard to give a second life to buildings that otherwise would have finished in pieces at the bottom of a dump. The objective of this article is rather to make sure all home buyers are fully aware of the importance of being careful when the time comes to acquire a home. Based on our extensive field experience and the many cases of hidden defect we have dealt with, the risks of falling on a bad house flip are not insignificant, especially considering that the main objective remains to derive a maximum of profit from a minimal investment.

To help protect potential buyers from this possibility, Legault-Dubois offers two solutions: firstly, we offer real estate investors working in house flipping a quality certification service. By using this service at the beginning of the project, an experienced inspector will accompany the staff in how to find the problems and adjust them properly. A quality certificate accompanied by a full inspection report can be issued, which will allow the seller to reassure his future buyers on the work that has been carried out.

For future home buyers, we offer a full pre-purchase home inspection service where the inspector will recognize the signs betraying any house problems arising from a bad flip. And while nothing can completely prevent future complications, a good pre-purchase home inspection remains the best way to ensure an informed real estate transaction.

In our next article, we will present the case of Mr. House who found himself with problems after buying a badly flipped house. Until then, we invite you to visit our pre-purchase inspection page to get a free quote.

 

 

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