Lipstick on a Pig – Understanding the Dangers of Rehabbed Foreclosures

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Services for Real Estate Pros with TheHousingGuru.com

Lipstick on a Pig – Understanding the Dangers of Rehabbed Foreclosures

 

piggy bank with lipstickWith millions of homes having been lost to foreclosure and millions more to come, savvy “investors” may purchase some of the best deals with the intention of turning them for a quick profit.  Unfortunately, some of those “investors” have little knowledge of construction and use their skills as “make-up artists” to put lipstick on what might otherwise be seen as a pig, a home with serious or even dangerous defects. 

 

Homes that have gone through the foreclosure process have often been neglected by owners who lack the financial resources to do routine maintenance.  Other homes may have been vandalized or had appliances, plumbing fixtures, wiring or plumbing pipes stolen.  And while the investor may replace missing fixtures and make repairs, in some cases those making repairs lack the proper licenses or certifications required by local building authorities.  Unscrupulous “flippers” may even attempt to cover up obvious flaws or dangerous conditions. 

 

Homebuyers considering the purchase of a home that has gone through foreclosure should always seek the guidance of an experienced real estate agent and should ALWAYS have the home inspected by a qualified home inspector.  While homes that are being “flipped” for profit may have lots of “sex appeal,” buyers must look beyond the surface.  Applying makeup cannot solve serious defects; and if there are unanswered questions or concerns it may be better to skip the flip.

 

To see some of the dangers posed by “flips,” and unscrupulous “flippers,” read these two posts from Jay Markanich, an experienced home inspector in Bristow, VA:

 

Mr. Jay’s Neighborhood – Meet Flipper

Oh, They Didn’t Need You.  The County Did the Inspection.

 

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Comments (82)

John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Ed - At least the process provides employment for inspectors.

Renee - It's unfortunate that buyers must be on guard for such chicanery.

Apr 09, 2011 09:59 AM
Rosalie Evans
Meritus Group Real Estate - Sioux Falls, SD
The Evans Group, Sioux Falls, SD Homes For Sale

I recall many years ago a pig with lipstick.....looked good until you went down to the basement and noticed the wall that was starting to cave in! 

Apr 09, 2011 10:09 AM
Mike Wong
Keller Williams Realty Southwest - Sugar Land, TX
Realtor: Commercial, Residential, Leasing, Invest

Love the topic John. Many investors are trying to keep the bottom line and budget as low as possible with just cosmetic repairs. Ive seen many flip homes come back on the market after they were foreclosed and the first thing I pay attention to is the level of workmanship of the remodel.

Apr 09, 2011 10:36 AM
Jack O'Neal
HomeSmart Elite Group - Gilbert, AZ

Great post, I advise all my buyers to do there home work, have have an inspection

Apr 09, 2011 11:56 AM
Allison Klein
Full House Realty Group - Fort Collins, CO
Fort Collins Real Estate

I don't think you are being fair. A lot of investors are contractors and do know what they are doing and are helping the real estate market out. You should defintely get any home inspected but a foreclosure a lot of times is no different than someone who has lived in their home for 30 years and done no improvements.

Apr 09, 2011 01:31 PM
Pamela Seley
West Coast Realty Division - Murrieta, CA
Residential Real Estate Agent serving SW RivCo CA

Jon, this is a good warning to potential buyers. I see this lipstick often.  If appearance seems suspicious, buyers should have their REALTOR® check title before considering buying.

Apr 09, 2011 01:37 PM
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

John - Inspections are important on any purchase but perhaps even more so on foreclosures and flips where the sellers don't have as much knowledge.

Apr 09, 2011 02:48 PM
Randy Harden MBA
CENTURY 21 Wieder Realty - Pompano Beach, FL
www.RERandy.com

John, you are absolutely right. I think people see foreclosure opportunities with rose colored glases on. The same for auctions. I don't think most of these buyers have the first clue as to the potential troubles they are getting themselves into.

Apr 09, 2011 03:23 PM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Rosalie - And that sort of problem cannot be hidden with makeup.

Mike - Caution is always advised.

Jack - Exactly.

Allison - . . . a foreclosure a lot of times is no different than someone who has lived in their home for 30 years and done no improvements.  I agree, and those homes should be carefully examined by an experienced inspector.  (But I don't quite understand what is unfair about recommending that buyers look beyond the cosmetic aspects of a home.  And of course there are qualified remodelers out there . . . but there are some bad ones too.  Read the posts from Jay Markanich.)

Pamela - Good suggestion.

Christine - I agree.

Randy - The risk is significant.

Apr 09, 2011 04:01 PM
Jack Mossman - The Nines Team at Keller Williams in Lodi
The Nines Team at Keller Williams in Lodi - Lodi, CA
The Nines Team in Lodi

John - With my buyers ... always as personal requirement (and I don't care how experienced they think they are) ... first a home inspection and second a home warranty!  If they aren't on board, then I find a referral to work with them .... Buyers never have a problem today .... it's the tomorrows I worry about!

Apr 09, 2011 04:07 PM
Evelyn Kennedy
Alain Pinel Realtors - Alameda, CA
Alameda, Real Estate, Alameda, CA

John:

It is scary when I encounter this type of flipped home.  I fear for my client's safety and for their pocket book.  They will be spending lots of money on repairs and dealing with city inspectors to correct faulty construction.  Definitely a can of worms.

Apr 09, 2011 05:58 PM
Debbie Gartner
The Flooring Girl - White Plains, NY
The Flooring Girl & Blog Stylist -Dynamo Marketers

John - Oh so sad but oh so true and it seems to be happening more and more.  The investor wants to spend bottom dollar and the person who rehabs it typically underspends and cuts cost.  A recipe for disaster.  Very important to hava  great inspector when considering these types of purchases.

Apr 09, 2011 10:13 PM
Kevin Kueneke
Caliber Home Loans - Encinitas, CA
San Diego Mortgage Banker

Many of the quick flips are being done by folks on tight budgets and the workmanship shows.  Maybe not at first glance, but even the untrained eye can usually pick out shoddy workmanship.  Just like a rental car right after a car wash, it might look nice, but you can always tell something is not quite right.

Apr 10, 2011 02:21 AM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Jack - Good advice.

Evelyn - And once opened, that can of worms can be difficult to close.

Debbie - Exactly.

Kevin - And that's the time to exercise extreme caution.

Apr 10, 2011 03:26 AM
Eric Michael
Remerica Integrity, Realtors®, Northville, MI - Livonia, MI
Metro Detroit Real Estate Professional 734.564.1519

John, just finished an inspection on what looked like the picture perfect "flip" house. Turned out they put a new kitchen in, but the new wiriing was extension cord and lamp-type wires. We couldn't believe it!!

Apr 10, 2011 09:29 AM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Eric - That's the type of "repair" that can be both dangerous and expensive.

Apr 10, 2011 10:19 AM
Tim Bradley
Contour Investment Properties - Jackson Hole, WY
Commercial Real Estate Expert in Jackson Hole, WY

Hi John, I used to buy and rehab houses in Dallas, a lifetime ago. It annoys me to see people slap a coat of paint on a problem and call it "rehabbed". Grr.

BTW, I found this post by way of http://activerain.com/blogsview/2238388/understanding-the-dangers-of-rehabbed-foreclosures, where it was reposted by another AR member as their own... That's just as annoying!

Apr 10, 2011 03:04 PM
Paul Francis
Francis Group Real Estate - Las Vegas, NV
Las Vegas Real Estate Agent - Summerlin Homes

Excellent article... I've come across these pigs with lipstick so many times and have meant to blog about it but keep getting sidetracked.

Out here in Las Vegas... Cheap carpet, cheap paint and cheap appliances are generally the dead giveaway that it's a pig with lipstick and you better have a good home inspector.

Apr 10, 2011 07:12 PM
Janice Roosevelt
Keller Williams Brandywine Valley - West Chester, PA
OICP ABR, ePRO,Ecobroker

Very true, it is alwsy "buyer beware.' There is no such thing as a risk-free deal

Apr 11, 2011 01:11 AM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Tim - I, too, have done several "flips" during my career and am frustrated when I see some of the homes being labeled as "upgraded."  (Thanks for the link to the other post)

Paul - An inspection is always in order.

Janice - Exactly!

Apr 11, 2011 06:22 AM