Source: realtor.com | Re-Post Houterloot 8/17/2017 –
If you’ve ever binge-watched HGTV, you may already have caught the home-flipping bug. The whole thing sounds so seductive: Buy a fixer-upper at a bargain price, renovate it fast, and sell. Doing so can be lucrative: According to RealtyTrac, the average flipped home in the U.S. is bought for $129,200 and turned around for $190,000.
And if you’re the one buying a flipped house? “It can be exciting,” acknowledges Desare Kohn-Laski, broker/owner of Skye Louis Realty in Coconut Creek, FL.
It’s a fully transformed home, after all. But such a purchase can also come with risks if a house flip was done with haste, resulting in rushed repairs that might not stand the test of time. So before buying a flipped house, make sure you ask these questions to assess whether it’s in good shape.
1. ‘Who’s the seller?’
“Is it an individual or an LLC?” is something every buyer should ask, advises Edward Griffin, an attorney in Maryland and Washington, DC, who’s currently working on a case involving a flipped home sale gone bad.
“Some people use a one-off LLC to purchase a foreclosed home, renovate, and then sell the property. After the sale, the LLC is then liquidated,” he explains. “Months later, when a buyer finds a defect in the property, the LLC has no assets and no longer exists.”
Translation: You have no recourse.
LLCs can be used as an appropriate vehicle for a home bought as an investment for a flip, Griffin clarifies, “but [they] can also be used by less scrupulous individuals to try to avoid liability.”
One way to tell one from the other is to ask how long the LLC has been in existence; a longer track record of at least a few years suggests it plans to stick around.