You can almost spot "Flips" from the listing sheet. They tend to be among the smaller homes in an area and the listing sheet highlights "new carpeting, new appliances, and/or fresh paint". Sometimes a major selling point is that a buyer can "rent to own." And the houses are almost always vacant.
These tend to be telletale signs of an investor owned home that was bought with the idea of doing a quick fix up before reselling or "flipping" the property.
Some investors buy a house and rent it out in its original condition for a year or two before doing a rehab, others buy with the idea of being in and out of the property in three or four months with a substantial profit so you can't always identify a flip from property deeds or sales history. But, if the deed tells you the house was purchased only months earlier you know for sure.
Flips are beginning to crowd the market as home sales slow. Investors who mistimed the market are finding that it is taking much longer than they planned to resell their property. Some who bought with the idea of renting for a few years to allow some natural appreciation are seeing their adjustable rate mortgages resetting to levels incompatible with the local rental market. Many investors who read too many books, watched too many infomercials about getting rich in real estate or watch the numerous house flipping TV shows went into the process with insufficient capital and are now trying to get out with their shirts still on their back.
So why should a buyer care if it is a flip? Several reasons. First of all, from the perspective of a bargain hunter, a "motivated" seller is sometimes a fairly desperate seller. Aided by a little research a flip could be a bargain buy.
The necessary research is not complicated. A trip to the county land office, registry of deeds, or wherever real estate documents are recorded and kept in your locality will give you all the information you need.
The deed will tell you when the house was purchased, by whom, and for how much. The "by whom" can tell you a lot. Is the house owned by an individual or a company? If it is a construction company they will have a quite different expense ratio for any work they did on the property than will a non-builder. If it is one of those companies that advertise they buy houses, they may have deep pockets that will make them poor candidates for a cutthroat negotiation. With the Internet and Google you can usually find out a lot about any individual or company recorded on the deed. The deed will also provide clues about the owner's financial condition. Mechanics and tax liens will show up on record as will any foreclosure activity or bankruptcy. In the latter two instances you will have a heads up that you may not be dealing directly with the owner in any negotiation but with the bank or the courts.
Another recorded document is the mortgage. From this document you can derive the amount the buyer put down - don't be surprised to find it was zero - and the terms of the mortgage; whether it is a fixed rate or adjustable, what the rate and payment is, and, if it is an adjustable, when and by what index and margin it will adjust.
Armed with this information you will be better prepared to make an offer.
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