It is interesting how many contractors are still fix/flipping.
I thought this was a short-term strategy during the crazy housing downturn. Now, three and four years later, the flippers are competing with home buyers that want to live in the homes and investors that want to rent out the homes, seemingly creating a housing shortage. Not really a shortage of homes, just a shortage of homes for people that want to LIVE in them. The flippers ultimately put the home back on the market at a higher price. If you’re looking at a house and want to know if the home is a fix/flip look for disclosures such as the following:
- Owner has never lived in the house
- Sold “As-is”
- Seller makes “no warranties”
- No seller property disclosure report (SPDS)
- No comprehensive loss underwriting exchange (CLUE) report
If you see any of this information on a listing report, you might ask the realtor why those statements are on there. It may not always mean a house was flipped, for example it may mean that the owner is financially strapped and can’t pay for any corrections to items found during a home inspection, so they are selling it ‘as-is’. If there is no SPDS, the seller is not offering any information about the property other than what you can dig up through an inspection. If it doesn’t have CLUE report, you’ll need to get one through your insurance company for a loss history on the home to see if there have been an property loss claims filed to an insurance company on the property, including break-ins. It is perfectly okay to ask if the house is a flip. If the answer is yes, ask what improvements have been done to the home. If you do buy a house that has been flipped make sure during the close of escrow that your title company knows the house is a flip. There have been unscrupulous contractors that have subcontractors do the work on a house, sell the home so fast and close on it, that they never pay their subcontractors. When this happens the title company is on the hook, not the new homeowner. It is the title company’s job to make sure that title is free and clear of all charges against the home including taxes and mechanical liens that a subcontractor can place on the home.