Top 10 House Flipping Mistakes To Avoid
It’s a seller’s market, I get that. And if you want to use your aunt and your best friend and your, your kid who because you want to give them a favor to get their first commission, all fine, because again, in all likelihood is going to sell. But in the true sense of picking a realtor, make sure it’s someone who has experience and has the hustle behind that experience.
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All right, so this is going out to all my rehab flippers out there. I know you think once you’re finished with the rehab that all you have to do is list it and sell. And well, I will for sure say right now, as I record this video, we are on the hottest seller’s market of all time. And most properties are going to sell at list price if not over. So I’ll disclaim that. That’s the disclaimer. But I’ll tell you, there’s some things that you really need to be thinking about, especially if you’re not a massively seasoned investor, rehabbing you know two to five homes every single month, here’s some things that I’m going to go over that you need to be aware of, because selling a home isn’t as clean and easy as we all like to think it is. So first of all, I’m going to bring up the inspections. Now, even in the retail space, you’re going to have homeowners or potential buyers, I should say, who are going to really lean on their own inspection, you have a homeowner’s inspection, you have a pest inspection. And there’s all type of inspections that you can actually have when selling your property. And some of them the buyers actually requesting, here’s the challenge that you may have with inspections. And what I would likely do, if I were you is do almost a pre listing inspection with your realtor and allow your realtor to bring up any potential reasons a buyer won’t love something. So I’ll tell you about a clip I just recently did. It had a perfectly working functional electrical box, it was a little older, but I didn’t have a need to replace it. Because quite honestly, once you go down the electrical world, and this was an older home, you might open up a can of worms that is totally unnecessary based around the fact that it’s still functioning and it actually would pass inspection.
The challenge is the buyer didn’t love it. They were buying a home that was like new and they really wanted everything to be like new. So while we were in contract, and they accepted the price, in fact, they paid a higher priced than we even listed that they would not move forward unless I handled this issue with the electrical box. Now, that being said, That was never brought up before by any other person that walked the property. So this one buyer that we decided to move forward with has the opportunity to create something out of nothing and we have to now make the decision. Do we scrap the buyer and move forward with maybe a potential other put it back on the market as active? Or do we actually say Okay, I’m gonna fix what you want. So the inspections specifically for the buyer, really can be a headache. So you really really really want to make sure you’re dialed in everything from you know, the facia, obviously the roof, the most obvious things are going to be the kitchen is the water working the electrical The AC is the pool pumps working, those things you really want to make sure are active and ready to go. Now as a quick side note to that I really want you guys to understand when things are not sitting on the market per se because as I said the disclosure or disclaimer was right now nothing’s sitting on the market. But let’s just say it’s on the market getting viewings going in and out of contract, you need to make sure you keep up with the maintenance of the home. One of the things that I’ve seen too many flippers do is they don’t continue to have some sort of yard maintenance going they don’t continue to have pool maintenance. I myself as I flipped a million dollar home, that was a cost and ongoing cost as we would go in and out of contract with certain buyers who ultimately would, you know, we’d fall out because some would actually get disapproved at the very end. But my point here is you need to make sure you maintain the home make sure you have a cleaning crew come in at least every week or every two weeks at minimum. You need to make sure the maintenance of the yards the maintenance of the pools, all that is kept up because while again, you are yes in contract or selling this home. No one wants to see a dirty home people leave garbage behind. After open houses. People are viewing it through the week and if no one is going in and out of the home making sure that it looks pristine. You’re just Creating a headache for yourself. Now, here’s something that is real time affecting me real time in two different ways. And that is your bank appraisal, right?
So a bank appraisal, obviously, most buyers in the retail space, if you’re a flipper, you’re selling retail, most buyers are going and getting some level of conventional or FHA loan, or a VA loan, to buy a home. And I did myself in my personal home right here in Miami, as well as I actually went out and bought a rental portfolio of nine properties in Alabama. Now, here’s what happened in both scenarios, one I was excited about one was not when I bought my personal home, there was, you know, a massive bidding war, I obviously won the war because I bought the home. But where we got to in price was more than the bank saw the value at and I essentially had to say, hey, seller, and I did this, I said, Hey, seller, I’m actually going to ask for a reduction in price. And he said, essentially, he said, eff off, there are too many offers behind you, you either going to come in with a difference in cash, or I’m going to move forward with a different offer. Well, I decided to come in with the difference in cash, because I love my home, it’s the home I’m going to live in and I love to end, there’s nothing else on the market. So I was really kind of put in a hard spot there. Now, conversely, I had appraisal done and all nine properties out in Alabama. And this is a rental property or this is a rental portfolio for me that I’m going to hold long term.
And actually, the appraisal came in roughly 12% above what I was buying you that. So I actually won in that scenario. And I walked into a whole bunch of equity, right out of the gate like literally 12% equity right out of the gate on that portfolio. So that made me incredibly happy, you need to be cautious when dealing with your buyers rehab that we dealt. Most recently, we basically did not want any buyer who is not bringing a true conventional loan, we knew it was actually a mobile home flip, we knew is going to be a little tricky. And so we wanted a conventional loan, because there were going to require a certain amount of cash down. And that made us feel a lot more comfortable about who that buyer was going to be. I didn’t want someone that could essentially put three or 5% down. So I don’t know if I feel as comfortable. So make sure when reselling your rehab flip, that you’re in the right price point, because the market is so hot, and everything is selling and because you’re essentially getting bidding wars happening, you’re in a place of strength. But I’ll also say that the limiting factor here is if your buyer, if you choose your buyer wrong, and they come back and their bank gives you a low appraisal, and they don’t have the money to put into it like I did for my personal home, then you’re gonna have to start this whole process all over again. And now you have an appraisal on the record that really can affect what now happens in that mostly you will have to disclose to future buyers. And I’m gonna leave it at this about making a decision on exactly what you want to remodel and improve and what you don’t.
This is very, very subjective. I think everyone in the world realizes what sells is going to be your kitchen, your bathrooms, I think we all realize that. But then you have this idea of okay, the markets on fire, I’mgoing to speculate a little bit, I think the value could be up here. So I’m going to push the value. Now you really have to decide what is going to be remodeled. And if you’re going to do it. I would tell you if you’re pushing that that threshold of pricing, you need to make sure it’s really dialed in really, really sharp. So you need to make sure that you are looking at all the other flips in that area that would be comparable. What type of island do they have, what type of granite or countertops do they have, what type of you know cabinets do they have, you really need to make sure you’re dialed in before you put this on the market. Make sure that you are you know as good if not better on all of the big ticket stuff. Make sure you’re dialed in on the contrast of paint and baseboards, make sure you have the right type of doors make sure you have what is selling for top dollar. just replicate it because you don’t want to get to the place where you have a beautiful home. But you decided not to replace the 10 by 10 tile from back in the 90s and 80s. And you decided to do everything else but not replace that because you wanted to skimp a little bit on your budget, I promise you, you will likely still sell the home because there’s nothing on the market. Again big disclaimer there. That will change by the way. At some point it will become a buyers market. So that will change. And so you’re looking out right now but I’d tell you to make sure that this sells to make sure you’re making the money you need to as a rehabber, I would really dial in all of it. I would not try to skimp you don’t have to right now because seller’s market, but if you are contemplating whether you’re going to be replacing the This perfectly looking 10 by 10 tile, even though wood is in right now, you were likely not going to get the buyer who really want that because they themselves are going to have to go in and do it themselves. So really be understanding that you are in a great spot as a rehab flipper. Quite honestly, most of my rehab friends are making fun of me that I still wholesale them their deals, because they’re making such big margins.
But the reality is, there’s a lot that goes into this. And then lastly, make sure you’re picking the right agent. Don’t just pick your friend and family because they’re your friend and family. This is a business decision and you need to treat it that way. I would suggest picking a hustler type agent who’s going to do everything they possibly can to get this deal sold. Again, it’s a seller’s market, I get that. And if you want to use your aunt and your best friend and your your kid who because you want to give them a favor to get their first commission, all fine because again, in all likelihood is going to sell. But in the true sense of picking a realtor, make sure it’s someone who has experience and has the hustle behind that experience.