24 Apr Can a Home Inspector Detect when a Flip is a Flop?
Canadian investors have been flipping houses at a phenomenal rate. As real estate prices continue to rise, flipped houses have become more common on the market. Realtytrac, a real estate hub, recently reported that 6.6 percent of all single family home and condo sales in the first quarter of 2016 in the U.S. were flips—a 20 per cent increase from the previous quarter and 3 per cent higher than the previous year. Rates in Canada are likely similar.
Contractors are competing to buy old, non-updated houses, driving the prices up, leaving less money to do the necessary upgrades. The building code states that the building is brought up to the current standard when it is renovated. This is sometimes not the case. Often it is the electrical and plumbing that is hidden behind walls that is not updated.
So how do you know if a flip is a lemon?
Become a sleuth. Look closely at whether or not the home has been cosmetically renovated. Ask lots of questions!
Can a home inspector help? Can inspection professionals have x-ray vision on a cosmetic renovation or a flip?
The bad news is: not really. A home inspection is visual – if all the defects of a home are covered up, there’s no evidence.
The good news is: we’re pretty good at looking for clues. While we have to work harder at putting 2 and 2 together, there are often indications that a home’s systems are not up to snuff.
Looking for Clues of a Flip
Sometimes there are obvious indications, for example, an old electrical panel, or a leak, but other times, it’s really not that obvious.
Example of a Clue in Electrical
Grounded plugs – As an inspector, we test plugs to see if they’re grounded. If none of them are, and all the wiring is covered up, there’s a pretty good chance the wiring hasn’t been changed. Beware: sometimes, even the electrical panel has been changed, but the wiring has not.
Example of a Clue in Plumbing
If we turn on the water at the highest point in the house, and find low water pressure, we know to look for other clues to tell if the plumbing might be outdated—but low water pressure could also mean that the plumbing supply line between the main and the hot water tank has too many bends and turns or too many plumbing connections–but when you’ve got an old 1930’s house, and the water stream is the size of a pencil, we usually suspect galvanized plumbing.
In some cases where there has been an extensive renovation, we have seen that the galvanized supply plumbing gets upgraded, but not the waste plumbing.
Example of a Clue on the Exterior of the Building
Form the outside of the home, we can often see a crack or movement of the building. In more than one case, we’ve seen a beautiful finished basement, but then as we look around at the outside of the house, for example on one house we noticed that the foundation had moved inward by about an inch, possibly making it unstable. Basement renovations should not be done before the building is deemed solid.
The fact is, inspecting a flip is tricky. We use as many detective skills as we can to use the clues to come to conclusions and build a story. For example, if a floor slopes down a bit, we might look for other clues that would indicate a rotten floor joist, or sagging beam, even if the floor is shiny and new.
While inspectors don’t have x-ray vision, they have seen more signs and signals of trouble than any other real estate professional. True, we can’t tell for sure if the home is a rotten flip, but we can use all the knowledge in our toolbox to help detect the signs.
For the biggest purchase of your life, you want to do everything in your power to find out if that flip is a flop.
When your emotions are running high, it’s easy to miss the small stuff. Getting an expert eye to take a look might just save you making a risky choice.