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Reno-to-Flip Homes, Part One – The Open House

by admin on April 22, 2011

This particular blog post started out as a simple expression of my frustration as a professional home inspector continually coming across bad reno-to-flip homes being unleashed on a largely unsuspecting home buying market. However, it quickly morphed into a multi-part topic designed to help home buyers recognize and avoid these problematic homes that are frequently money pits and sometimes even unsafe to live in.

Unfortunately, it’s been my experience that “fully renovated” or “completely updated” are loose terms that are usually interpreted very differently between buyers and sellers.

The Hook

For the home buyer, the bad reno-to-flip often starts with an open house. A big part of house hunting is to cruise desirable neighbourhoods or scour the MLS system looking for open houses in the areas one finds most appealing. Before walking into any open house, I urge everyone to first start a relationship with a real estate agent they are comfortable with and can trust. I’m not a fan of long-term agency agreements that lock you into working with someone beyond a few weeks or maybe a month but an agreement of some kind should be expected.

The Agents

When you agree to work with an agent, you give him or her assurance that you’re serious about buying and gets the ball rolling with them actively working on your behalf. The other advantage is that when you walk into an open house, without your agent present, you can let the listing agent know that you’re already working with someone and will bring them into the picture if you like what you see. Otherwise, you may find yourself stuck working with an agent who is already acting on behalf of the seller. Note: Some people think an arrangement like this could offer them savings on the purchase price or with commissions the seller pays. Do your homework – this is rarely the case.

The Dazzle

So now you’re in the house, possibly what may be the house of your dreams, all new and shiny with a great kitchen, sexy bathrooms, beautiful hardwood or new carpet, freshly painted walls and ceilings, and on and on and on. The open house agent begins by selling you the sizzle. You’ll commonly hear how the house has been “fully renovated” and that “everything is new” – there’s nothing to do but move in and enjoy your “new” home. Pride of ownership abounds!

Unfortunately, it’s been my experience that “fully renovated” or “completely updated” are loose terms that are usually interpreted very differently between buyers and sellers. Yes, some things have certainly been done but few buyers stop to think about how well done these things are or what hasn’t been done yet – and the flippers are counting on you buying before you even think to ask.

Although very difficult when buying a house, this is the time to really try to take emotion out of the equation and look at the house as impartially – and indeed critically – as possible. Having a friend or relative who won’t be living there often helps; just be sure they’re not afraid to be honest with you.

So Far, So Good

If everything has gone well up to this point, it’s time to bring your own agent into the picture. If you all agree that this house may be the one and is worth pursuing, now is the time to have the house looked at professionally by a qualified home inspector. If it looks like yours is the only offer, make the inspection conditional in the agreement to purchase. If you even think there’s going to be multiple offers, a pre-offer inspection is a small price to pay to help you separate the good from the bad. If the vendor/listing agent won’t allow a pre-offer inspection, this should be a major red flag for you. Pre-list inspections usually available on-site are often inaccurate or incomplete. Remember, these are generally done for the vendor’s benefit and not yours; an honest pre-list report will be balanced.

Stand Your Ground

Finally, it’s extremely important not to let the listing agent present at the open house in any way bully you or try to pressure you to act immediately. Do not let time constraints force you into decisions without first crossing your T’s and dotting your I’s. This is usually easier if your own agent is with you at the open house but that’s not normally the case. (As a sidebar, if you feel like your own agent is trying to bully you, you’ve likely picked the wrong agent and you’ll need to get guidance from another source on how to protect your interests.)

Next time, in Part Two of Reno-to-Flip Homes – The Cosmetics: Does the house sizzle or fizzle?

The Complete Reno-to-flip Homes Series

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