There are pros and cons to buying flipped houses. The main benefit is that you won’t have to manage any major renovations on your own. It’s the most convenient type of house to buy unless you’re going to buy a brand-new home—but then you’d be paying a lot more.
Of course, there are horror stories. You might have heard about homebuyers moving into a flipped home only to discover that the “renovation” was little more than cheaply applied makeup. A new carpet covers rotting floors, and shiny new kitchen cabinets are hiding clunky plumbing. The homebuyers realize that their “flipped house” is actually still a fixer-upper.
Believe it or not, there’s another way you can reap all the benefits of a flipped home, without any of the cons. Consider pre-purchasing a flipped home.
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Why You Should Consider Pre-Purchasing A Flipped Home
A presale home is a property where you can start the home-buying process before it’s move-in ready. Many presale homes are houses that are still under construction. But you can also pre-purchase a home that’s in the process of being flipped.
There are (at least!) four major advantages to pre-purchasing a flipped home:
- Avoiding Open-Market Competition
- Benefitting from Normal Contingencies and Protections
- Gaining Stronger Creative Influence
- Minimizing the Emotional Rollercoaster
Let’s dive into each of these benefits.
1. Avoid Open-Market Competition
One of the most difficult aspects of buying a home is dealing with the competition that comes with the open market. There is a limited number of homes on the market with plenty of buyers ready to offer on a good opportunity.
While a house might initially fall within your budget, it could attract interest from several other buyers, and the price could escalate out of your range. A bidding war could ensue and drive an affordable home into unaffordable territory. Inexperienced homebuyers, in particular, mistakenly up their bid when they can’t afford it and wind up purchasing a house that’s far out of their budget. When they finally move into their new home, they’re “house poor”.
But when you pre-purchase a flipped home, you can avoid the open market altogether—so long as you know where to look for the opportunities!
Here at CT Homes, for example, we manage our off-market inventory of properties that are going to be flipped or are in the process of being totally renovated. While under construction, these properties don’t have traditional listings. If you take the initiative to reach out about one of these off-market properties, then you could potentially secure yourself a deal on a new flipped home without any of the bidding-wars that you’re likely to face on the open market.
2. Contingencies and Protections
A common fear when buying a flipped home is that the home has not truly been flipped. You don’t want to put down six figures on a house only to discover that you paid $100,000 more than what it’s really worth. Inexperienced homebuyers can easily miss red flags that suggest a renovation was done poorly.
But when you pre-purchase a flipped home through an established company, you’ll have all sorts of protections that ensure you’ll be moving into exactly the place that you paid for.
When purchasing one of our presale homes, for example, you are afforded all the normal contingencies that you’d get with a standard home listing:
- Appraisals: You’re able to get the property appraised once or twice (depending on your lender’s stipulations)
- Home Inspection and Walkthroughs: You can inspect the property before and upon project completion and still hire a 3rd party Home Inspection Company to thoroughly investigate the condition of the finished home
- Contractor History: You’ll know who performed work on the property (not always made available when you’re buying a standard flipped house)
- Scope of Work: You’ll receive an exhaustive list of everything CT Homes did to the property so you’ll know what is new
Appraisals are much more advantageous when you pre-purchase. Standard house flippers sometimes turn down buyers who request multiple appraisals. Since they financed the fix-and-flip with a hard money loan, they’re on a time crunch to get the property sold, and they’re not willing to drag out the sale with multiple appraisals. That also means they’re less friendly to buyers who are using FHA loans because FHA loans require multiple appraisals.
Virtually all the protections you’d get on a standard home purchase would be available to you when purchasing a presale home by CT Homes. Furthermore, you can still buy the property using traditional financing, including FHA loans.
Typically, the transaction will begin while the home is still undergoing renovations, but your contingency period and escrow period may not begin until the renovation is complete.
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3. Stronger Creative Influence
House flippers may know a thing or two about renovations, but they may not complete the home with the specific finishes you’d like to see. Although it’s nice to have renovation work completed for you, some buyers of flipped houses feel as though they missed an opportunity to give their new abode a personal touch.
When you pre-purchase a flipped home, you may get to have a stronger creative influence on the finished property as long as your chosen design features fit the overall budget and timeline of the renovation. Since you’re starting the transaction while the home is still being renovated, you may get to choose certain design features, like:
- Countertop style
- Paint colors
- Flooring type
- Doors
Being able to choose design elements is wonderful because you can make the property feel more like “yours.” When you finally move-in, you’ll get to enjoy a home that more accurately reflects your own personal tastes. You’re bound to love it even more.
4. No Emotional Rollercoaster
Arguably the best thing about pre-purchasing a flipped home is that there’s no emotional rollercoaster.
It’s a tragic but all-too-common story: you fall in love with a home on the open market. You walk through the house and envision your family, your furniture, your future. The house falls within your budget, and you’re able to get the financing that you hoped for. You make an offer, and the seller seems interested…
…and then you’re informed that you’ve been outbid. Desperate, you make a counter-offer…
…and it dissuades the other. You rejoice, thinking you’ve won the home…
…only to be informed that you’ve been outbid by a new buyer. And this time you can’t beat the price.
Home buying can be an emotional rollercoaster, especially if you’re a first-time homebuyer or if you’re trying to buy a home for your family. But it doesn’t have to be. As mentioned earlier, when you purchase an off-market home through a company like CT Homes, you won’t have to compete with other buyers. Nor will you get excited about a new home, only to discover that it’s not the house you thought you were getting.
When you pre-purchase a flipped home, you’ll get exactly what you expected when it comes to home price and home quality. There’s no heartbreak involved.
Summary
There are significant advantages to pre-purchasing a flipped home. You can find a house in an off-market inventory and avoid the bidding wars that happen on the open market. You’ll have all the protections that come with a standard home listing, and you may even get to choose certain design features on the property. Plus, deciding to pre-purchase a flipped house can save you from the emotional rollercoaster of the traditional home buying process.
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