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Posted at 05:30 AM ET, 02/27/2013

Good deals can be had when purchasing a renovated home, but be wary

I’ve been getting a lot of messages from people who are looking to buy a house but they are set against a flipped or rehabbed one, saying they are poor quality.  There are a lot of people who believe that most home flippers cut corners and gloss over problems to save money and to maximize profit.

 

Well, let me just tell you something as a professional real estate rehabber: You might be right.  It is very costly to do a job right all the way down to the framing.  Many flippers concentrate all their efforts on the top layer and cover everything else.  And most buyers are only worried about granite countertops and new windows.

On the other hand, there are some very professional rehabbers out there and you can buy one of their fully renovated homes for about the same price as the well maintained home down the street. 

The problem is that it’s very hard to identify a good rehabber. You can ask if the work was completed by licensed and insured contractors but even that doesn’t guarantee good work. I often find problems with work completed by contractors. When it’s on my project I get the problems corrected when I see them but I can’t be there every day.

I do at least require my contractors to stand behind their work for the buyer for one year.  If you are dealing with licensed contractors, they will be compelled by states department of licensing to stand behind their work.  If not, you can file a complaint against their license.   

I find when I first start working with a contractor there is some confusion about this.  He or she thinks that the warranty is to me and it dies when I sell the home.  This might be the misconception that your rehabber and contractor are working under and you should clarify before you close the deal.  Contractors are compelled to by the licensing body to stand behind their work for one year.  So the warranty is on the work and not to a specific person. 

Here are some tips: 

 ●Hire a private home inspector.  I know they may seem like a waste of money.  It just looks like a guy walking around with a flashlight and to a degree it is.  Inspectors cannot cut holes in walls to look at insulation, framing or buried plumbing and electrical.  They can only look at those things that are open and accessible.  But good inspectors look much closer than most buyers and usually know a little more.  If you find evidence of sloppy work on the surface, then there is a good chance there is buried sloppy work.

 This drives me crazy with my contractors.  We do a beautiful job on a home but then on the final odds and ends work they’ll get rushed and sloppy.  I had a contractor use caulk as mortar to replace a brick in a patio.  I tell them when a buyer sees that he turns right around.  In their defense, that last 10 percent of a job is the worst.  It’s comprised of a whole bunch of little separate jobs that require separate tools and clean up.  Meanwhile, the contractor is itching to move on to the next project.  A lot of sloppy stuff is done at this point in a project.  But it’s a good sign if you can see that attention was paid to the final details.

● If work was done that requires a permit, check to see if the permit was pulled and if government inspections were conducted and passed, especially a final inspection.  County inspectors drive me crazy.  I could go on and on but if there were inspections conducted then at least you know there was another set of eyes on the project.  The problem is that a lot of work doesn’t require permits.  The flipper doesn’t need a permit to replace the carpet and paint the walls.

●Do your own homework.  Do a real good inspection yourself.  I find that really spending some time in a home helps me determine the quality of work.  I will often go clean one of my homes myself after work is completed. 

Cleaning a home reveals so much about the construction.  I don’t suggest you clean a home you don’t own but take time in a home you’re going to buy.  I’ll often try to get different perspectives.  Contractors are like homebuyers.  They do their quality assurance by walking through the home.  They often miss problems that are not visible from a normal standing position. 

I will often lay down in the middle of a room.  Or climb up on a chair in rooms to get different perspectives.  Stand on both sides of every door, including closets.  Yes, get in the closet with a light and close the door.

 Really good deals can be had by purchasing a renovated home.  You can get more value and you can save yourself a lot of stress and aggravation.  Even a below average professional contractor is probably better at remodeling a home than the average home buyer. 

Just go in with your eyes wide open.  Know that corners are often cut and do your homework.    Don’t jump into a home just because of the flashy finishes and don’t walk away from a good deal just because it was remodeled.

Read more about Pierce’s experiences as a real estate investor

Justin Pierce is a real estate investor in Northern Virginia. In his occasional column, he writes about investing in real estate.

By Justin Pierce  |  05:30 AM ET, 02/27/2013

Tags:  investor

 
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