What Is a Flipper House?

Understand the Benefits and Drawbacks

Woman stripping plaster walls in a home she is flipping

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Flippers are investors who buy a home—a flipper house—preferably in its original condition, at a price they hope is under market value in a desirable neighborhood. Then, they fix it up and as quickly as possible to flip it for the next buyer, who purchases for a lot more money. If work is done correctly, these homes are true bargains for the new buyers. However, if a coat of paint or new laminate flooring covers issues that should have been fixed, it can become a money-pit for the new owner.

Growth in Popularity

Remodeling a fixer-upper and turning it over for a profit is a legal and accepted way to make money in real estate. The practice has become so common that there are several television shows dedicated to its pursuit. Due to the rise in popularity in flipping homes, many people are attempting it. These first-time flippers may not understand the necessity of making repairs to current building code standards.

Flipper homes are attractive to buyers because they are turn-key. Everything is new, sparkly, and fresh, including the appliances. If the price is in line with the comparable sales in the neighborhood, it really doesn't matter how much the investor originally paid for the home.

Hire a Buyer's Broker

Assuming the investor didn't pull any funny business when acquiring the home, buyers still should exercise caution when considering a flipper.

Buyers should hire a buyer's broker to negotiate the purchase for you. Sellers generally pay your agent's fee. A buyer's broker will look out for your interests and represent you, not the seller.

Home Inspections and Repairs

Hire a reliable home inspector. Ask the home inspector to thoroughly investigate the plumbing, heating, electrical, and mechanical apparatus in the home, including structural. Take along a home inspection checklist to verify nothing was overlooked.

If the inspector suggests you obtain other reports such as a roof inspection, sewer inspection, HVAC report, chimney inspection, structural engineering report, or pest inspection, follow the home inspector's advice.

Be sure to do your own inspection too. Look for signs that the flipper cut corners or tried to save money by using inferior products or materials. Note any defects you find and ask for repairs in the purchase contract.

Flipper Renovations Should Be Permitted

Check with the local building authority—usually, the county or city handles this—for permits. Most work involved in renovations requires the pulling of a permit and inspections by the building authority. Not pulling a permit for work that requires a permit is common and, in some cases, not necessarily a deal-killer.

However, there is no guarantee the work was performed according to code if the flipper didn't obtain a permit. Unpermitted work can also become an issue later if you decide to sell the home.

Get a home warranty. With a home warranty plan, buyers are covered for one year in the event a system fails, electrical malfunctions, or plumbing leaks. Home warranty companies charge a service call fee, but the repairs are free.