Marshall Park is a D.C.-based real estate agent at Redfin. He manages the brokerage’s real estate operations throughout the Mid-Atlantic region.
Love them or hate them, investors play a big role in our local housing market. With the rise in home prices throughout the region, investors are competing to buy lower-priced properties, making updates to appeal to today’s buyers and hoping to sell for nice profit. While established investor groups and contractors have been investing in residential property for years, the promise of profits has also encouraged amateur property flippers to enter the market.
When it comes to renovated properties, the level of professionalism, experience, craftsmanship and attention to detail can vary greatly. Flipping a property requires significant capital and is not an easy endeavor. Yes, many renovations are done the right way. But buyers should be aware that there are also more dubious outfits that use shoddy workmanship and cut corners hoping to make a quick buck.
Don’t fall victim to a bad renovation. Make sure you ask the right questions throughout the process, take appropriate precautions to protect yourself and work with an agent who will help you spot red flags and advise you when it’s wise to walk away.
Here are some tips:
• Work with your agent to ask the seller any questions you have about the work that was done. A seller who is open and responsive is a good sign. Ask if the work was permitted and who completed the work. You can also search permit records with the local government. In D.C., visit the Department of Consumer and Regulatory Affairs Web site to search by address. There you can see what permits were pulled, see what inspections occurred and check the status of the work. Keep in mind that not every renovation requires a permit.
It never hurts to do some quick online research with the name of the contractors and owners. Your search may come up empty, however, as many investment groups create a new LLC for every property.
• Pay attention to the details. The challenge with renovations is that much of the important structural, plumbing and electrical work is behind freshly painted walls, so it cannot be visually inspected to ensure it is done properly. But you can learn a lot about a renovation by paying attention to the details and finishing.
Are the corners square? Are the floors even? Historic homes have their quirks. Houses settle over time and a slight slope in the floor is not necessarily a reason to walk away, but it is something to note and address with your home inspector. Check the windows to see if they’ve been replaced and look at how they’ve been sealed. Check for any cracks in the foundation, which can be a major red flag. Have original walls been removed? Have your inspector check out the layout and identify the load bearing walls. Look out for how the deck is attached. Our agents see a lot of improperly installed decks and porches that can be a safety hazard.
• Consider the overall design choices. Open the cabinet doors and drawers in the kitchen and bathrooms. Sometimes what looks like a beautiful kitchen is poorly designed such that drawers hit each other or you can’t fully open the dishwasher or oven. If appliances are not sold with the property, measure to ensure that a standard size appliance can fit and has the proper hookups to function in the designated place.
• Look at the materials used. An owner that selects low-grade materials tried to save costs and may have cut costs elsewhere. A contractor that does poor finishing work may have done poor quality work behind the walls as well.
• When it comes to your offer, include a home inspection contingency. If you spot a red flag during the inspection, you can work to address the issue with the seller or opt to walk away without losing your earnest money deposit. In the D.C. contract, a home inspection is slightly different from a general inspection contingency, which allows the buyer the right to inspect the property to inform themselves, but not request repairs or credits from the seller.
Buyers are responsible for hiring an inspector, so select someone with good reviews, who will crawl into the crawlspaces and bring a ladder and get up on the roof. This is especially important for row houses where it’s not possible to do a visual roof inspection from the street. Your inspector will also take a close look at the HVAC systems and the electrical panel. See if the house had a heavy-up upgrade — meaning the system has been upgraded to increase the amount of electricity coming into the house. Homes have more energy needs than they did 100 years ago, so your inspector can tell you if the system has been upgraded to meet modern electricity needs.
• Consider asking the seller for a home warranty when submitting your offer. These policies typically cost between $400 and $800 and are paid by the seller at settlement. A policy typically covers the main systems in the home, including the plumbing, electrical and HVAC for the first year of ownership.
• Consider buying an enhanced title insurance policy. If the previous owner failed to pay workers or subcontractors for work performed on the property, a mechanic’s lien can be filed against the property and the burden would fall on the new homeowners. A basic title insurance policy does not cover liens that were filed after time of settlement, whereas an enhanced policy would cover the homeowner for this type of mechanic’s lien.
Many homes on the market today are beautifully updated, move-in-ready and can be the perfect fit for your family. By taking appropriate precautions and doing your due diligence, you can buy a great renovated home and rest assured you are making a smart investment.
Previously from Marshall Park: