The Beautifully Staged Home: Nicely Remodeled or Cheaply Flipped
Don't be fooled! Homes in Silicon Valley come on the market in a variety of conditions from horrible to breathtaking. Some are dirty, cluttered, and perhaps even run down. I saw one this week that desperately needed exterior paint, landscaping to be tamed, and the removal of large quantities of faded plastic flowers that droop down over the living room window (all this in Los Gatos, with a million dollar price tag).
Most homes, though, are better prepared for sale, as they should be. Savvy homeowners and agents know that the old adage is true: "you only get one chance to make a first impression". The home needs to be clean, uncrowded, and appealing from the day it goes on the market to maximize the seller's return. You want to make the right changes to improve the bottom line when selling, without over-improving such that the return begins to diminish.
In addition to that range of conditions in which homes are sold by their long term owners, we have to consider the "flipped house". A flipped house is one in which an investor has recently purchased a home, often from an original or long-time owner, usually in solid condition but with a dated, tired appearance. What should buyers be on the lookout for?
From the Flipper's Perspective
The idea is to buy the home cheaply, do some primarily cosmetic improvements, and sell it at a tremendous profit quickly.
Here are a few things that a flipper is likely to do in preparing a home for sale:
- remove all curtains or windowcoverings (you may not notice that they are missing, and replacing them is a "hidden cost" to buying the home) - it makes the house seem light & bright
- pull up the old carpet and refinish the floors (good idea for most sellers)
- freshen up the landscaping, and possibly the driveway, for great curb appeal (also a good idea for most sellers) - often includes sod and colorful annuals near the front door - maybe add sprinklers
- new front door, or at least repaint door and polish or replace hardware
- replace interior doors, lighting, countertop surfaces in the bathrooms and kitchen (often with granite)
- new pulls on cabinets
- fresh paint inside and out
- new windows and exterior doors
- new mailbox, doormat
- powerwash the outside patio, exterior of home
- polish and clean anything old that remains
And here are a few things most flippers won't do:
- replace the furnace
- replace the roof
- replace the water heater
- improve the electrical system
- repipe the house
- provide a pest clearance
- drainage work, if needed
- repair fencing
- foundation repairs (if there are a lot of them, it's unlikely the flipper would have bought the house)
- get permits and finals (some will, but many won't, and will deny that they are needed)
Forwarned Is Forarmed
When you buy a home that has been updated or remodeled by the owner, for the owner's use, you will often find sensible improvements done to important structural elements of the property. That may not be the case with a flipped home. Let's look at an example where a long term owner and a flipper might do things differently.
Take the case of a bathroom remodel and the plumbing that services it. As you may know, many of our tract homes here in Silicon Valley were built with galvanized steel pipes. That type of plumbing lasts somewhere between 35 and 45 years in most cases. If a 35 + year old home gets a bathroom facelift that includes removing the old vanity and installing a new one, in most cases, the resident homeowner will replace the plumbing in the wall behind the vanity at that time so that when the home eventually is repiped, that cabinetry won't need to be removed and the wall won't have to be torn open. A resident homeowner will do it while it's easy.
An investor, a flipper often skips this important option. Recently I showed a home in San Jose in which that was the case. The kitchen and bathrooms looked good, but the plumbing hadn't been touched - and the pipes were showing symptoms that it was time to repipe. And replacing those pipes now is going to be a bear!
What Can Consumers Do to Not Be Fooled?
First, when you visit homes, take along a checklist, if you need one, to make sure you aren't so dazzled by floorcoverings and countertops and canned lights that you forget to check the furnace, roof, and structural elements (most homes have presale inspections - I'm not advocating that you visit the crawl space) such as the foundation, roof, electrical systems, and so on. Read the inspections carefully, being sure you understand what is and isn't done, before deciding to write an offer.
Second, there are a number of websites that will tell you when the home last transferred title. Find out when, and find out how much the current owner paid. If you are working with a real estate professional, ask your agent (hopefully a Realtor, who abides by a code of ethics beyond what a real estate licensee promises to do).
Third, ask about permits and finals. In Santa Clara County, permits are needed for most improvements. Some agents are mistaken in thinking that if an item is simply replaced, it doesn't need a permit.
Not true. What needs permits? Roof, water heater, retaining walls more than 4' high, new kitchen cabinets, you name it. It may vary a little from city to city and town to town but by and large, if you replace something, you probably need a permit. It's easy to find out online as the county and each town/city has this information easily available. Do not take the agent's word for it that a permit and final is not required! Many simply don't know. Find out.
In San Jose, you can check the permit records* online: https://www.sjpermits.org/permits/permits/general/generalquery.asp
Buying a flipped home can be a good move if there are not hidden or partially concealed defects which will be difficult and expensive to repair once you move in. In younger homes, there may be no issues to worry about at all!
Older homes, though, could present serious areas of concern. Upgrading the electrical work, for instance, could mean tearing up walls, and later needing big patches or new sheetrock, wall texturing and paint. It's messy and disruptive. If you have computers, it's likely that the electrical system will matter to you a great deal. So find out before you write the offer whether the home that looks so good is simply gussied up, or if it's in great shape structurally as well.
*Disclaimer on the murkiness of permit records: There are many incomplete permit records so the fact that the county or a city doesn't have it on file does not mean that it wasn't permitted and finalled. The city of Saratoga, for instance, was only incorporated about a half century ago, and many buildings predate that time. When it went from being under the jurisdiction of Santa Clara County to that of the City of Saratoga, many files were simply lost in transition. Sometimes the whole file isn't lost, but part of it is. Generally, if there's an addition and the homeowner is paying property taxes on it and the size is reflected in the county records, it's most likely been permitted and finalled. I've sold homes in San Jose where that was the case, and we were able to prove that the work was done with all the right authorization etc. even if the paperwork was missing. All of this, of course, is for old permit history - not recent work done by a homeowner or investor.
So homeowners, keep your own file of what's been done, permitted and finalled. Do not rely on the town, city, or county to keep accurate records - even though they usually do.
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