Home Flippers Buyers Proceed with Caution
Home Flippers Caution
A house on our block was foreclosed on by the bank and after 2 years the bank finally put the property up for auction. A professional flipper purchased this home, cleaned it up, fixed a few things inside, put new grass and some mulch around the plants. The house flipper did nothing about the work done without permits. The bank probably did not tell him anything about the permits and the flipper never asked. I assume that since the grass went in, it’s going on the MLS and the buyers are going to start kicking the tires (or should I say door).
I know that a lot of major work was done on the property without any permits, before the bank took it, including converting the garage into a master bedroom and master bath. At a recent block party I spoke with a neighbor who works for the city and we discussed the issue of someone buying a house and then finding out that work has been done without permits.
Until you apply for a new permit you are safe, but once you do apply for one and the inspector shows up, that’s where the trouble begins. They will inspect the work and if it’s up to code you pay an permit fee plus fine and you are safe. Anything that is not up to code has to be brought up to code. This can get very expensive.
The question is how do you avoid this issue of no permits and he had a very simple solution. Have your home inspector pull the plans from the city and match them up to what your house looks like during the inspection. I know my inspector did not do this during the inspection, and I guessing not many other inspectors do this. If nothing else the buyer can pull the plans and compare them to the house.
In 2004 someone purchased a house in Tampa FL. That buyer took out two mortgages from two different banks and then lost the home to foreclosure in 2013. This is when things got weird. The second mortgage holder beat the main mortgage holder in a race to foreclose. That bank sold the property to a flipper who then sold it to the Krafts. If you want to read the complete story about the Krafts click here.
But no one caught the big title mistake. The home should have never been sold because of the clouded title. Then in December 2015 the first mortgage holder, now Nationstar Bank, decided to foreclose on its lien and take the title. Now the Krafts have problems. Yes they have title insurance, but just think of all the angst they are going through and what happens if they have to move or those dreaded legal bills. It seems like no one in the foreclosure and flipping market cares so it’s buyer beware with extra caution.
I think this issue is similar to buying a car from an auction or car dealer that is not reputable and they buy cars that were in major accidents or floods/hurricanes. These car get transferred around from state to state until you wind up buying the car. Car owners are protected by the lemon laws. Home owners have no protection other than title insurance. With all the flipping going on realtors should be cautioning their clients about these issues. Home buyers are looking for a smooth closing and the joys of home ownership, not spending more money on repairs or legal battles.