Flipping houses isn’t as easy as it seems on TV, and there are several problems one could run into. Partnering up with someone who knows what they’re doing and cares about doing a good job on a home can make the flipping process a lot less risky.
What You Should Know About House Flippers
The biggest risk in flipping a house, for the flipper, is losing money on it. For the listing agent, the biggest risk is working with someone who doesn’t do a quality job—on accident or worse, on purpose. If someone is not practiced in the art of the flip, their poor work could become your problem. New house flippers often underestimate the time, money, work, and calculation that needs to go into the flip, and others are solely worried about making a profit and don’t produce quality work.
5 Things to be Weary of Before Working with Flippers
On top of the skillset you carry for being in real estate, some agents also are, or were, house flippers, too. They’ll be more knowledgeable about what to look at when selling a flipped house, reducing the risks of taking on flippers as clients. Let’s look at some aspects that a real estate agent should assess when working with house flippers:
The biggest indicator of if this person will do a good job on their flip is their knowledge. Do they know the basics of house flipping? Did they do the work themselves or hire a contractor? Are they up-to-date on building codes? Do they have permits for the work they did? It’s important to know they knew what they were doing before agreeing to work with a flipper.
Knowing the flipper’s track record is another key factor to keep in mind. Do they have any prior experience? If so, how much? How many houses have they flipped? How many have sold for a profit? While someone could have years of experience in house flipping, but still do a poor job of renovating. Ideally, more experience will indicate more quality work, but don’t be afraid to “grill” them with questions like these. Have a tactful approach, but be acutely aware of their answers and reactions. A flipper who doesn’t have anything to hide will more likely be honest and relaxed with these kinds of questions. Of course, on the opposite side, a flipper who has different motives and values will be much more likely to skirt around questions like these and would be more defensive in their responses.
As a real estate agent, you regularly work with and around other people in the business, like contractors, handymen, etc. Ask the flipper with whom you are considering working with and see if they have references first and start there. If they don’t want to give you references, back out of the deal immediately. If they are reluctant or hesitant send you references, also assess that as a red flag. Check if anyone in the industry has worked with the flippers you’re considering listing with and if they have any knowledge of the work they’ve done, their process for flipping, buyer satisfaction with the flipped home they sold, etc. However at this point, if you’re that unsure about their work, it may be sign that the risk greater than the reward.
Try taking a look at the properties that the flippers have worked on. Ask for a portfolio or pictures of the before and afters to get an idea of how and what they tackle in home renos. Do they go for homes that require more work than others on the market? Have they stayed with rehabbing homes that require less intensive work to be done? What are the comparables in the area like? Additionally, ask about details on not just the cosmetics. Was there work with the pumping, electrical or meeting code regulations that were fixed during the renovations? How? As a realtor, you know that a house can look good, but unaddressed or botched repairs will be the final blow to calling a house a home.
5. Sale Timing and Price Setting
Finally, possible clue into the work ethic that has been put into a flipped house is how long it takes the flipper to put the home back up on the market, and for what price. Depending on the extent of renovations the house needed, time it took to complete the changes, and how much it sold (if at all) will tell you a lot about how much a house flipper cares about what they are doing. Of course, everyone’s situations can be different, but a major red flag is if the home needed massive renovations and it took a very short amount of time before they put it up for sale means that they might have rushed the project to make a quick profit. Yikes! In addition to short turnaround time, also lookout for how much they are wanting to put it up for sale. There’s something fishy about a $50k home going up for $175k a few weeks after going off-market.
While some people may actually do quality work fast, be weary in these cases—you don’t need the buyer coming after you for shoddy work done by the seller that becomes apparent only after the buy.
There are already tons of things that go into flipping a home labor-wise, so sometimes other aspects can get overlooked. Working with a house flipper who knows the ins and outs of the real estate business is going to reduce the risk for both them and yourself if you list and sell a property together. Remember to choose your clients carefully—as picking the wrong one could get you into legal and/or financial trouble due to their mistakes or negligence!