Home flipping is growing at a rate comparable to 2006, and some real estate pros are warning buyers to be cautious and do their homework before purchasing a property they plan to flip.
"Some flippers are turning historic homes into modern, hybrid treasures, but others are slapping cosmetic fixes on truly troubled properties, ignoring mechanical and structural issues," CNBC reports. "For more unsuspecting buyers, that move-in-ready dream home can quickly flip into a nightmare."
That was the case for one buyer, Cameron McGuire, who had purchased a three-bedroom, three-bathroom condo in Washington, D.C., that had been renovated by a local developer-flipper. Six months after moving in, McGuire received a call from a Washington, D.C., housing inspector who had been investigating claims against the developer by other buyers.
The inspector "gave us list after list after list of things that were either not permitted or violations or weren't zoned correctly here in the property," McGuire told CNBC. "Receptacles are not permitted the way that they're installed here. The canned lighting up in the ceiling is not permitted the way that it is supposed to be in here. … It was an unending list of things." Permits for a back addition, which included two bedrooms and two bathrooms, also had never been filed, which means that McGuire now must tear it down.
"It's literally putting lipstick on a pig," Stephen Carpenter-Israel, president of Buyer's Edge, told CNBC about some home flips. "They're just doing cosmetic stuff and actually covering up problems, and that's scary because it's very difficult to figure it out."
CNBC provided some of the following tips for buyers purchasing a flip:
- Make sure the house flipper is a licensed contractor
- Request a list of all the work done and ask of receipts and warranty information
- Check for permits on the property
- Ensure all upgrades pass full inspection