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MIKE HOLMES: How to figure out if a home has been flipped

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Spring is home-buying season, and buyers need to be extra careful when checking out potential homes. You don't want to buy a lemon.

There are two main options when buying a home: Either you buy new -- a completely new build -- or you buy used.

If you're buying a new home, make sure you check out the builder's track record, and speak to people who have bought their home from the same builder.

Were they happy with their new home? Did they have any problems within the first year? Second year? What types of problems were they? Did they require major fixes, like a leaking basement, a problem with the HVAC or electrical issues? How helpful was the builder when it came to fixing the problem?

Just because a house is new doesn't mean it won't have issues. I've seen brand new homes, not even five years old, with major fixes that nearly bankrupt the homeowner. A new home shouldn't have major problems, but too many times it does.

If you're looking at used homes, be careful with ones that were flipped. These homes are especially a problem because they are deliberately made to look good, but aren't necessarily built or renovated to be good. They take advantage of homebuyers' lack of knowledge when it comes to picking out shoddy workmanship.

Looks are deceiving. A home that's been flipped banks on it.

I don't like flips because most of them are done with one purpose: to make a profit. In most cases, the homeowners don't care about quality because they won't be living there. Their top priority is to sell fast to save on mortgage payments. And once it's sold, any problems in the home become the responsibility of the new owners.

How do you know if it's a flip? There are some warning signs, but again, it comes down to doing your homework. Most people think you need to be a pro to pick out the warning signs, but a lot of it is just common sense.

For example, if the homeowner tells you they just finished renovating the kitchen and bathroom, how much you want to bet they had enough money to do both renovations properly?

A standard kitchen renovation done properly will cost at least $30,000. A bathroom reno can cost nearly $20,000. If the only reason for renovating was to sell, I would be cautious on how the work was done. Good work takes time, and it isn't cheap. Ask the homeowner details about the reno, such as how long it took to find the right contractor, set up the job, choose materials and for the work to be done. If all it took was a few weeks, I would be cautious.

If a home looks like it's been renovated, do a search for any permits on work completed. If changes were made to the plumbing, electrical or structure, permits needed to be pulled.

Also look for cheap materials, such as MDF for cabinetry or laminate flooring. Keep an eye out for bad trim and sloppy paint jobs -- these are red flags for quick and cheap renos. When the trim is off or doesn't line up you can bet the workmanship isn't top quality. If they fumbled on the finishes, they probably cut corners on the stuff they know most buyers will not see -- the stuff behind walls and below flooring.

If windows were replaced, check to make sure they are at least energy star rated. If the home has bad windows you will pay for them for years in extra energy costs. The cost of replacing them will run you at least $10,000. So if they need replacing, as a buyer, you need to know.

One last thing homebuyers can look into is getting a home-history report on a property. Some home inspections even include this service as part of their basic home inspection.

A home-history report uses municipal, provincial and federal data to gather the most up-to-date property information. It's an extra tool that helps protect a homebuyer, so you know exactly what you're walking into.

The report can tell you the home's previous sales price, sale dates, building-permit information, information on structure or any previous insurance claims related to the property. You should know if a home you're looking at had major water damage, flooding, a fire or damage from a natural disaster. Some home-history reports can even tell you if a house was ever used for illicit purposes, like a marijuana grow operation or meth lab.

The more information you have on a property the better. You will know if the electrical or plumbing needs to be looked at by a professional to make sure it's safe, or if the structure of the home was been modified or undermined. It puts you in a better position to buy the right home and buy it smart.

-- Postmedia Network Inc. 2014

Watch Mike Holmes on Holmes Makes It Right on HGTV. For more information visit makeitright.ca

Republished from the Winnipeg Free Press print edition May 3, 2014 F6

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