The thing with buying a Sacramento foreclosure flipper home is you don't know what you are buying. A Sacramento first-time home buyer generally first views the home like this photo of pancakes with strawberries and whipped cream. The sellers might have staged that home. It can be enticingly beautiful but deceptive. You don't know what's under those granite counters and new paint job. You could press a fork into the pancakes and find it is raw in the center.
A home inspection won't necessarily disclose mold, but a buyer will be asked to sign a mold disclosure. The disclosure will inform the buyer that mold could or could not exist. The only way to be certain that the home is free from mold is to hire a mold specialist to test it.
Some of these foreclosure flipper homes have sat empty for months, maybe even for years before the bank sells them to an investor. I have one such short sale listing at the moment that has been sitting in water for more than 2 months now. It was flooded when pipes froze in the ceiling and burst. The mold is probably the size of basketballs. The investor who purchases this will fix it up and put it back on the market.
Another problem with buying a foreclosure flipper, especially a flipper that has been fixed up within the 90-day seasoning period for FHA / conventional financing, is the buyer could be subject to a mechanic's lien if the seller didn't pay the contractors. If the home is older, it may not qualify for a homeowner's title insurance policy. Without that special coverage in the title insurance policy, the buyer has no protection against a mechanic's lien.
If you read an MLS listing that advertises this home is "not an REO or short sale," check the public records to determine if the seller acquired title via a trustee's deed. Because when you buy a foreclosure flipper, you're buying that home in its as is condition. You will probably get no warranties, no disclosures, no repair work, no history of that home.
Don't be seduced by an attractive plate of pancakes. Moreover, hire an experienced Sacramento buyer's agent who can help you to investigate those homes and perhaps insert language into the purchase contract that makes the seller provides receipts and warranties. Hire an agent you trust who will represent your best interests.
Photo: Big Stock Photo
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Certified HAFA Specialist
My Sacramento Real Estate Listings
Elizabeth Weintraub is an author, home buying columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout the four-county Sacramento area. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. Broker-Associate at Lyon Real Estate. DRE License # 00697006.
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Elizabeth - I'm concerned that the great number of foreclosures and their attractive prices offers the potential for numerous "nightmare" scenarios. I always advise buyers considering foreclosures to seek the guidance of a Realtor familiar with foreclosures and "flipped" properties.
This may be the next wave in the housing market debacle. The recent rains will bring any drainage, roof and water issues to the forefront so best to be working with an experienced professional when purchasing an "As Is" recently flipped property.
Done right the flipper offers a great service to the market but you're right finding out what happend to the house while it was vacant is important.
I totally love pancakes. In fact, I think IHOP has all you can eat pancakes right now. Great advice for those purchasing homes that are investor flips.
You know Elizabeth, I used to list homes for a couple of investors who did flips the right way... they fixed the problems and then listed the home. Once I sold a home to a "want to be investor" and he was planning on "hiding" the flaws. I did end up selling that home for him without him doing any hiding. I immediately found a buyer who would accept it flaws and all and let the "want to be invester" make a small profit he was happy with... but the lesson I took from it was to NOT do business with him anymore. How some investors just hide things instead of repair or fix just makes me nuts.
Oh and I forgot to mention... I'm pretty sure I now HAVE to have pancakes for dinner. They look so good.
Elizabeth: I have the same sense of caution about the foreclosure flippers as you. In order to make money on them, the investors really do skimp somewhere. And making something temporarily gorgeous is easy. Fixing hardcore issues is time consuming and expensive.
I would expect a home inspector, pest/termite inspector, and roof inspector to find out most issues at a home. Adding in a mold inspection is a good idea too. I have had bad experiences with home warranty companies and cannot recommend them. The vendors are trying to upsell and in my view cannot be trusted.
From the desk of David Dee,
Elizabeth, there are definitely drawbacks to buying foreclosure flippers. However, if the work was done properly, it can be a good buy. The key is finding that one.
We call this "dressing a turd", excuse my language. uck, raw pancakes, so pretty on the outside and ucky on the inside!!
Elizabeth,
I did many flips a few years ago, and always did my best to fix any problems that the home had. Sometimes, I flipped the home within 3 to 6 months of work, put in over $50,000 worth of work and walked away with no profit. On the other hand, on some other deals I made plenty of money. The whole deal was very stressful, and after 3 years I moved on. I still miss it sometimes, but not enough to jump back in.
When buying a flipper home, I would only do it from the investors that work like I did. I would recommend to do all the inspections necessary and hire an agent that is familiar with local investors.
Tere