The Tell-Tale Signs of a Home Flipper’s Hasty Renovation

There’s plenty of appeal in buying a home that has been recently renovated and is move-in ready. But it’s not always easy to tell whether a property has been upgraded in a thoughtful, thorough way that will retain its integrity.

Some developers, whether professionals or hobbyists, will flip a house to sell quickly, which means undertaking a hasty renovation that may look great initially, but prove to be shoddy work after some time has passed (and all the contracts are signed).

In other cases, the problem is less about cheap fixtures and finishes and more about the unique character of a home getting lost in the process of renovating. In New York, for instance, there have been several cases in recent years of developers and investors attempting to drastically alter historic properties and leaving only the facade intact, a trend that preservationists are pushing back against.

Renovations overseen by homeowners rather than house flippers are generally perceived as more trustworthy by buyers, and more attentive to actual issues that come up when living in a space.

“If you’re comparing a homeowner renovation versus an investor trying to flip a property, the latter is all profit-driven,” said Christopher Totaro, a broker with Warburg Realty in New York, as well as a former contractor and renovation expert. “Time is money, and they’re more willing to overlook things.”

Homeowners, on the other hand, know the property better and are more emotionally invested in it, and are therefore more likely to take the time to carry out a thoughtful upgrade.

“A developer’s interest is to make money, and also possibly develop a reputation that will invite investors to support their next project,” said Paula Del Nunzio, a broker with Brown Harris Stevens in New York. “An individual renovating a house or apartment for their own use has a different objective: They are not thinking about selling it immediately upon completion, but rather about living in it for the next seven to 10 years or more.”

This means the challenge for buyers is to identify the signs of a high-quality renovation—as well as the red flags indicating a poor one.

Signs of a thoughtful vs. a hasty renovation

Before a buyer even steps foot inside a home, they can do some research to get a sense of who’s behind its renovation—and whether that developer did their due diligence.

“The biggest concern is whether the work was permitted and done in an appropriate matter, up to codes and standards,” said Dominic Labriola, founding partner and COO of Craft & Bauer Real Estate in Los Angeles. “Often there are two types of developers: Those who call themselves developers and those who are actually licensed and bonded insured contractors.”

The important question for buyers is whether the property they have their eye on was upgraded by someone qualified to do so. They should check on the history of the developer, Mr. Labriola suggested, to see what kinds of projects they’ve been involved with in the past. They should also check on public records to determine whether the developer received the right permits to renovate or build.

Hiring an appraiser is a smart way to research these issues, and could spare buyers a lot of frustration in the long term.

“You could run into an issue where a property has an open permit and you can’t get financing,” Mr. Labriola said. “You also want to make sure the property isn’t using space in a way that’s not permitted, which could affect its value. Make sure it’s been inspected by a professional and the work was done in a fashion that was up to code.”

When it comes to touring the home, a good way for buyers to ensure they’ll spot potential defects or shoddy workmanship is to visit more than once.

“A person should see a space three times,” Mr. Totaro said. “Every time you go in, you’re going to pick up more detail. The first time you walk in, it’s sensory overload. The second time, you’ve got the big picture and you start looking closer.”

It’s often the small details where buyers will be able to identify the red flags that indicate a less-than-thorough renovation.

“Some developers make outstanding choices, but in many cases buyers feel that developers choose cheap fixtures and design solutions,” Ms. Del Nunzio said.

One reason for this is that many developers tend to buy products like cabinetry and tile in bulk at a discount, and use these materials in multiple projects. It’s helpful, then, for buyers to look closely at the finishes in several comparable properties to determine whether a renovator has used unique, high-end products.

“Developers tend to buy from some of the same suppliers, and you start to see the same types of cabinets, tile, and flooring in many properties,” Mr. Labriola said. “The signs are really in the fit and finish, the quality and attention to detail.”

On a walk-through, buyers should scrutinize little picture elements like gaps in the flooring, tiling that doesn’t line up correctly, and doors that don’t open the right way.

Beyond that, they should also consider a home’s infrastructure and whether its systems, like the hot water heater, have been updated recently.

“I’ve been in a new construction where the contractor has to go back and fix multiple units because of leakage, floors swelling, and sheetrock splitting,” Mr. Totaro said. “These are properties worth as much as $30 million. Price is not necessarily an indication of quality. The developer might have used good materials, but if the methods and insulation practices aren’t up to par, you can install a $250,000 kitchen and have it be of poor quality.”

Upgrading to sell

For homeowners planning to sell, the best bet is to focus on cosmetic upgrades rather than invest in any kind of major projects. Cleaning windows, repainting, improving the brightness of the interiors, minimizing clutter, and perhaps installing new appliances are all small fixes that go a long way toward helping potential buyers visualize themselves in the home.

“Anything more major can be a waste of money, as it is impossible to predict what a new buyer would want,” Ms. Del Nunzio said. “A better idea would be to involve a tasteful broker who could recommend a stager, who may then suggest minimal but effective steps.”

Given that it’s a buyers market in several major U.S. cities, with a surplus of high-end inventory in L.A. Miami, and New York, sellers are less likely to see a substantial increase in their home’s sales price relative to the money they invest in a renovation.

“As a homeowner, it’s a mistake to pull out a kitchen and start over,” Mr. Totaro said. “Take a look at your stove. Can you upgrade appliances and make the kitchen look better? The key is not to invest a lot of time, money, and emotional bandwidth into a property before you sell it.”

By Alanna Schubach via realtor.com