With Terry Story, 28-year veteran Real Estate Agent with Coldwell Banker in Boca Raton, FL
Six Key Questions For Flipped Homes
In this week’s Real Estate Round-Up, Steve picks up the conversation on flipped homes from where he left it last week and asks Terry Story to go through the six key questions you should ask before buying a flipped home.
Beware Of LLCs
First on Terry’s list is to check whether the seller is an individual or an LLC (Limited Liability Corporation). If it’s an LLC, she warns that LLCs are set up as special purpose entities to buy and flip homes and are often dissolved after the transaction goes through. So, buyers may not have any recourse if the LLC has been shut and a major issue crops-up after they purchase the home. So, always check who the seller is and be extra careful if it’s an LLC, advises Steve.
Scope Of Renovation
The next thing Terry looks for is the scope of house renovation before the sale. She checks to see if changes were outward and cosmetic, such as re-doing the kitchen and baths, or if those changes went deeper. If the remodel involved structural changes such as moving walls or opening up the floor plan with major electrical and plumbing work, she wants to know if the city’s Planning Department approved the plan and issued permits or not. That’s because the permitting, inspection, and approvals process makes sure major changes meet the latest codes for earthquakes, storm safety, electricals, plumbing, energy efficiency, etc., that work was performed to standards by a licensed contractor, that the dwelling is safe for future residents, and meets home/quake/flood insurance requirements. This due diligence is all the more important on flipped homes in case the LLC isn’t around to cover you after the sale.
Check City Hall For Permits And Floor Plans
On the flip side (no pun intended), if the city finds out that the house had unpermitted and unauthorized work done on it, they’d likely require major (and potentially expensive) changes made before you can sell the house. So, make sure you know what you’re getting into ahead of the purchase.
Terry suggests prospective buyers always go down to the local city hall to verify the house’s history with permits, changes, floor plans, etc., so they can compare them to the actual house and see if there are any red flags or unauthorized changes. Buyers could also ask the city about remedies they may have to make to bring the house up to code if they buy it as-is.
In addition, check with previous owners and talk to neighbors about what went on next door to see if major changes were made such as roof replacements, basement leaks, re-plumbing, etc. Steve also recommends checking out the neighborhood for safety, crime, noise levels, etc. by simply asking around.
Vacant Homes Are Targets
In addition, flipped homes often sit vacant before a sale, so see how long the house has been vacant and whether that could have led to mold issues, frozen pipes (in cold climates), vandalism, and things that may not be on disclosures or that qualified home inspectors might also miss. Get a good overall picture of what the house was like before you buy it.
Purge Your Home Before You Prepare to Sell It
Switching topics, Steve wants to talk about a list, from Terry, of the nine things you should purge your home of before you move. Terry starts with getting rid of all the junk you’ve accumulated over the years such as bathroom towels that aren’t all that nice and that you really don’t use, old sheets and extra pillowcases, and appliances and kitchen gadgets that you really don’t need, such as rarely used juicers. Then go through the closets and take out all your unworn or incorrectly-sized clothes so someone else can use them, and throw out kitschy souvenirs, extra coffee mugs and old trophies that clutter-up your home. Terry recently did a purge on her own home and decided to only keep a few trophies that really meant a lot to her and threw out all the “participation” prizes, certificates, and ribbons that she’d accumulated over the years. Her advice for women is to throw out cosmetics and toiletries about every two years because most of them expire.
This purging exercise helps clear up your home and makes it look roomier, cleaner, and more attractive when buyers walk through it, increasing your chances of a quick sale and getting the price you really want.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: It’s time for Real Estate Roundup. This is the time every single week we get together with noted real estate agent Terry Story. Terry is the 28-year veteran with Coldwell Banker located in Boca Raton, Florida. Welcome back to the show, Terry.
Terry Story: Thanks for having me, Steve.
Steve Pomeranz: Terry, last week we started to talk about—we ran out of time—about buying a house from a house flipper, someone who buys a house fixes it up and resells it. I think you have to be really careful. And we started talking about the six questions that you should ask first before you buy a flipped house. Take us through them.
Terry Story: Sure, well, the first is who’s the seller, is it an individual or an LLC? If it’s an LLC, just be wary that LLC means limited liability, so you may not have any recourse after you purchase a home and close and an issue comes up. So, that would be the first thing, just explore it.
Steve Pomeranz: Yeah, well, I think the idea here is that if it’s an LLC that they can close after the house is flipped. And then you have some problems later down on the road you have no recourse because that LLC is gone. So be very, very careful. What’s another thing you should look for?
Terry Story: What was the scope of the renovation, was it just simple kitchens and baths? Or, for example, did they start moving walls, open up the floor plan? If that’s the case, was any major electrical and plumbing work involved? You really need to know if that’s been done because they’ve altered the structure of the house.
It’s important for you to know if any of that was done because it leads to the next problem or issues, were permits pulled for this kind of work?
Steve Pomeranz: That’s a big one, why is having a permit so important?
Terry Story: Well, you want to make sure it was done right especially when it comes to plumbing and electrical.
That’s where things go wrong, and by having permits, then the property is being inspected. You’re having the inspector come out and make sure that the plumbing is done right and same with the electrical. So a lot of it is safety, safety reasons that you want it done.
Steve Pomeranz: I think when you go to sell the house if the city finds out that you have unpermitted work, that’s going to be a big problem for you.
Terry Story: Absolutely.
Steve Pomeranz: Yeah, so selling a house may be a problem so you may save some bucks, may save some time but it may catch up with you in the future, right?
Terry Story: So, when you buy the house you can go down to your local city and go to the permit records and see what permits are already on the house.
So, you’ll know what was done and what wasn’t done.
Steve Pomeranz: Very good, all right, so what’s the fourth question to ask?
Terry Story: Well, who owned the house previously? A lot of times if you can find out who owned it previously, you can find out certain things like when the roof was replaced, if there’d ever been a leak in a basement.
Now a lot of this can be answered on seller’s disclosures, but a lot of times that information isn’t present. A lot of times, if you just talk to neighbors, neighbors know an awful lot. You’d be surprised what they’ll tell you if you just snoop around a little bit.
Steve Pomeranz: Well, absolutely, we always talk about going around the neighborhood. I mean, this has nothing to do with a flipper but drive the neighborhood at night, see what the noise level is like, see if there are people out in the street. If you see someone, pull over, ask them about the neighborhood.
I mean, you’re going to be spending a lot of time here, make sure you do some homework to make sure this is what you think it is.
Terry Story: That’s right.
Steve Pomeranz: So, go outside, check the out of doors, right?
Terry Story: Absolutely. And then how long’s the house been vacant?
So again, these are houses that are flippers. So, for a house to be flipped, a good chance that it sat vacant for a long time. Are there mold issues that you’re not aware of? Did pipes freeze up? Was there any serious vandalism that was done that you’re not aware of that you really can’t see?
Because there’s a lot that can be done that you don’t see behind the walls that inspectors can’t readily tell you either. So, it’s just a good idea to get an overall picture of what the house was before you bought it.
Steve Pomeranz: The thing too about a house that’s been flipped is you may be blinded by all the gleaming, the gleaming new paint job, the vinyl inserts in the windows.
They kind of put a cover on the house to make it look really attractive. After you live there for a certain period of time, all of the defects will start to show. So, I think you really do need to get a qualified home inspector, especially on a flipped house, to really kind of go deep.
Terry Story: Absolutely.
Steve Pomeranz: Okay, changing topics here. I love this one that you provided for this week’s show. Purge your home of these nine things before you move.
Terry Story: Yeah, if you know you’re moving, you’re going to have to do a lot of purging. So I would probably start with the bathroom.
When you go into the bathrooms, it’s amazing how much stuff and junk is in there. We all have tens of thousands of towels that aren’t even that nice.
Steve Pomeranz: You don’t even use anymore really.
Terry Story: You’re not going to take them to your new home most likely. So you might as well pitch them and it will make the linen closet look a lot nicer with fluffy towels in there and cleaner.
Get rid of the old stuff. Same with all the sheets, we all have tons of sheets. Actually, what you can do with these things is donate them. You can bring them to pet shelters.
Steve Pomeranz: Good idea.
Terry Story: They use these old towels and sheets. Then go through the kitchen.
We all have tons of appliances that we got when we got married that we don’t use like juicers and who knows. I have a lot of things that I don’t think I ever opened.
Steve Pomeranz: I have a juicer. We used it—I don’t know, for about six weeks—and then we realized we were getting fatter.
So, I think all the sugar from all the fruit and everything, I’m sure it was our fault.
Terry Story: Yeah, we have all those little gadgets that you’re not going to be taking to your new home, so you might as well start purging those things.
Then go through the closets, all that unworn clothing. Again, these are great things to donate. Break them up into piles—what you want to take with you and what you don’t. And stop saving those clothes that you think you might fit into again someday; the reality is you’re not going to.
Steve Pomeranz: Yeah, I know.
Terry Story: Gosh, and then the souvenirs. It’s so much fun going to other people’s homes because you see all the stuff that they collect. And you think you’re bad and then you go into other people’s homes. But we have, we all collect souvenirs when we travel, the mugs, and all those things.
Just save a few of your favorites, you don’t need 1,700 coffee mugs.
Steve Pomeranz: I see you on Facebook a lot, and you do a lot of partying and a lot of traveling and that kind of thing. Your house must have a lot of souvenirs. Is it true?
Terry Story: No, no, I don’t buy the knick-knacks. I’d rather save my money to go on another vacation.
Steve Pomeranz: Okay, sounds good.
Terry Story: I’m not a collector.
Steve Pomeranz: Talking about collector, what about collections you’ve outgrown? Like when you were 12, your mom gave you elephants, and you were collecting elephants.
Terry Story: Yeah, you know what’s hard to get rid of are your trophies. I was cleaning out my closet, and I finally broke down and got rid of all my trophies. I kept one that meant the most to me. But what do you do with those things? And then, of course, there’s all those ribbons for participation; you didn’t do anything you just showed up for the event.
But those things have to go. That the cosmetics and toiletries, ladies.
Steve Pomeranz: [LAUGH] Yeah, that’s not a man thing.
Terry Story: There’s so much of it. It’s not good after two years anyway. Maybe six months, I don’t know I don’t wear much makeup. But clean it out, purge it, get rid of it.
You’re putting your house up for sale, nobody needs to see all that stuff anyway.
Steve Pomeranz: All right, well we’re out of time. As always, I’m speaking with Terry Story. We’ll put the rest of these on the website. So, come to stevepomeranz.com and you’ll be able to get the entire list of things that you need to purge before you move.
But, again, my guest, as always, is Terry Story, 28-year veteran with Coldwell Banker located in Boca Raton and can be found at terrystory.com. Thanks, Terry.
Terry Story: Thanks for having me, Steve.