Buying and Selling Tips March 4, 2023

What should I pay attention to when buying a flipping house?

I would like to share some points to consider when buying a flipping house in real estate transactions.

Investors buy houses with poor conditions at low prices and make profits by renovating, repairing, and decorating them before reselling them. The final profit of flipping houses comes from two sources: (1) the appreciation of the house itself brought about by the constantly rising real estate market, (2) the value created by structural and functional improvements after the renovation.

When the sold house can achieve both, investors can get greater returns. However, many people have concerns when buying flipping houses, fearing that the current seller has only done surface work and that there may be many hidden problems and potential risks. So, what details should you pay attention to when buying this type of house?

Firstly, ask the current seller to provide previous seller disclosure  when purchasing the property. You need to know whether someone died in the house during the previous owner’s residence or in recent years, or if other negative factors have caused the house to be sold in poor condition, including any disputes with neighbors. This information requires disclosure from the previous owner.

Secondly, it is recommended to request the Home Inspection report when purchasing the property, which will allow you to understand the specific condition of the house prior to renovation and determine whether the current seller has done all the details correctly. When renovating a house, we usually need to do two types of work: (1) Remodeling, which is visible work such as replace new kitchen cabinets or bathroom tiles; and (2) Repair, which is invisible work such as repair foundations, water pipes, termites, electrical circuits, and roofs.

In this regard, I want to remind everyone that ordinary home inspection companies often mention a sentence regarding hidden problems, “Suggesting further inspection by a professional.” This avoids their responsibility while reminding you of certain issues to be aware of. For example, there are professional foundation companies for inspecting foundations. Generally, the cost of a professional foundation inspection is between $800 and $1000 in the Bay Area. It is worth getting a professional foundation inspection report for some houses in certain locations.

Thirdly, to find out whether every stage of the current renovation process has obtained City Permits. Of course, renovations with City Permits will be more secure and reliable. In theory, except for replacing floors and painting, no other work should be done without a City permit. However, many sellers renovate without obtaining permits. What are the consequences of buying these types of houses? I will analyze this in detail in the next video. I hope this video will be helpful to those who are buying flipping houses. And, of course, feel free to contact me, Carol Zhang @510-565-0005, a Bay Area real estate agent, for buying or selling properties.