How to become a house flipper—deal killer 101

There is no shortage of examples of the Profit Motive gone awry.  While not essential to the cause, a co-conspirator with the profit motive is the idea of Maximizing Profits.  After all, if the goal is to make money, why not make as much of it as possible?  Maximizing profits can have a very dark partner on its side as well—the Short-cut.

HAAA! Nobody can see me!

HAAA! Nobody can see me!

One example of the Profit Motive gone seriously awry is the Flipping of Houses.

I think it would be unusual for someone to be in the flipped-house-market for altruistic reasons.  They probably also to not have notions that they are somehow providing “opportunities” for buyers that they would not otherwise have.

If such opportunities were the case, I would have seen more examples of it by now.

In spite of that I have seen flips where the work has been done satisfactorily.

It is certainly true that ANY house can have unsatisfactory work done to it.

The “flip” is a special category of house-for-sale or there would not be a special name for it.

Flips that are “done right,” have several signatures that are very common.  They will invariably have good curb appeal.  This is typically not difficult as they are often houses found in gentrifying neighborhoods–so of course they outshine the neighboring houses.  This is not a particularly high bar to get over.

This “outside” staging–fresh paint, new roof, new lawn, new fence etc–is consistent with the house also having great “indoor” staging.

All of this makes for GREAT looking pictures on the MLS listing–especially when done in HD (I like to think the HD stands for “Highly Deceptive”).

In the context of this post I am using the term “staging” to be something “beyond/above and disconnected” from real staging that actually has real value in the context of selling homes.  It is meant to point out that work done in flipped houses is more like temporary staging than like the real thing.

And then, along comes the home inspector, to bring everyone back down to earth and to expose the “improvements” for what they really are.  This is akin to discovering the “lipstick on the frog” or uncovering the attempt to “make a silk purse out of a sow’s ear.”  They stand out in the swamp if you know what I mean.

I HAVE GOTTEN TO THE POINT THAT I HATE FLIPS AND I THINK THEY SHOULD BE ILLEGAL!

There, I have said it.

It might be a bit of hyperbole, but this is pretty close to what I actually think about it.  I don’t however, have any clue how outlawing flipping could be accomplished politically–given the 100′s articles on line about how to engage in flipping houses.

Things are looking a little murky

Things are looking a little murky

It is one thing for a homeowner to put their home on the market, marred by a few short-cuts taken over the years.  I consider that fairly normal.  What is not normal with flips is to have to deal with short-cuts in relation to nearly EVERY SINGLE COMPONENT of the home.  All of a sudden all those nice listing pictures of the exterior, of the interior and of all the amenities start to go all brown and out of focus like some ancient daguerreotype. And while a daguerreotype is a very nice “look” in my opinion, that is not typically what the buyer has in mind.

On a flip, the list of items that are going to get posted to the report summary should not be any longer than what gets posted to the summary of a report on brand new construction.  Typically they are 3 times as long and 10 times as complicated.

And think about this:  The inspector cannot typically charge any more for a flip than a similar house that is not being flipped, because most of the time the inspector will not know it is a flip until they are at the inspection and start to hear the croaking. I would rather inspect crawl spaces on some days.

The reason inspections take longer and reports are longer all comes back to the short-cuts taken.  Somewhere along the line, someone said, “I don’t need no stinking permits and I know how to install a water heater, siding, windows, decks and electrical.”  (Think maximizing profits again.)

In new construction, there is a reasonable expectation that someone besides me (jurisdictional inspectors) has looked at the work during the process of construction.  With a flip there is likely to be no such assurances.  The inspector has to wrestle with what they cannot see, as well as what they can see.

While permits are REQUIRED for most work done, there typically will not be any permits.  If there are permits they are often not finaled and apparently have no intention of being finaled (No house should be allowed to be put on the market until all permits are finaled IMHO).

The kicker is that it will be listed and marketed as if it is the same as new construction–if not better!

You are never going to see a listing state, “Like new—fully remodeled down to the studs—all with no permits!”  And yet this is the way they are constructed, over and over and over again.  It is not uncommon to find serious defects with all components of the home in a flip—but the frog looks “HOT!”.  This takes the whole notion of kissing frogs to a whole other level.

It seems that many flips are undertaken by people that have a little knowledge of “how things work”—just enough to “make things work.”  It is extremely rare for flippers to actually know enough about all the nuances of the codes to perform all aspects of the project in a way that meets all current standards.  Hell, it is hard enough for even trained professionals to keep up with the rules.  In this sense, since all this information is readily available, there should really be no excuse for work not being done properly but when you already know everything there is to know, any additional time spent “learning,” is cutting into profits at the end.

Flippers are gamblers. 

They are gambling that no one is going to notice the mistakes and omissions that might force work to be redone to correct the short-cuts (talk about cutting into profits).  Add to this, that the flipper is more likely to hire untrained workers to help them with the work, and they can’t possibly train them to do things they do not know how to do properly themselves.

The most common victims of these homes are first time home buyers.

I have kids that are the same age as the typical first time home buyer.

This mirage, of my own kids being the buyer, does not bode well for a flipper that is having their property inspected by me.

In my opinion, the flipper is possibly the biggest real estate deal killer there is.

 

By Charles Buell, Real Estate Inspections in Seattle

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The “fuzzy math” of Net Zero Energy

Politics, ego, stubbornness and selfishness all play roles that sometimes blur the more altruistic desire to do what is right for the planet, the country, and our families.

Like herding cats

Like herding cats

In the widest of contexts, most people involved in the Green Movement are well meaning, well intentioned, thoughtful and serious folks.  But that does not prevent it from being a bit like herding cats.

Most cats, including myself, have LOTS of ideas about where we think the green movement should be going.  We are all hampered to one degree or another by what we bring to the table.  Some bring vested interests (they either have something to sell or have personal issues) that further muddies the waters.  All of this can prevent us from seeing the other cats in the room.  When cats join forces it can result in the exclusion of more singular cats with equally valid ideas.

In a sense this is why the government is the way that it is in terms of getting nothing done–it is merely a reflection of the rest of us–it is us.

I have been involved in this discussion since the early 70’s, so there are not too many cats I have not come across.  Most initial wounds have long since healed and I only occasionally get scratched nowadays. However there is always some snake-oil salesperson willing to pull the insulation over my eyes.

I think it is totally amazing that so many of the conversations, arguments and discussions common in the 70’s, still seemingly have no clear answers nearly 45 years later (it is more likely accurate that we either refuse to see the solutions, or vested interests make so much noise the solutions can’t be heard).

Here is a partial list of what is causing the rub–you can probably think of others:

  1. People want to maintain a “perceived” standard of living.
  2. People want to keep the toys they are used to playing with.
  3. People want houses to look like what they are used to living in.
  4. People want to use the planet’s resources as they see fit.
  5. People want to drive wherever and whenever they want, in whatever they want. (should we even be discussing whether an Hummer can be made more “efficient?”)
  6. People want cheap fuel.
  7. People expect technology and government to guarantee the things listed above.
  8. People think they have a God given “right” to the things above.

These can all be pretty much summed up with:

People want to piss upstream!

***

It is my opinion that as long as the things on the list above have some amount of truth, we will continue to not resolve the conversations, arguments and discussions surrounding what it means to be “Green” in a meaningful time frame.

As long as people continue to be “green with envy” for what someone else has, we will not likely come together as a planet to tackle the difficult questions that lie ahead.

So what are the big problems?

  1. Lack of conservation.  As long as we think that there is an unlimited supply of anything, besides love, we are likely to fail in saving the planet (actually it is our species that needs saving–the planet would be fine without us).
  2. Planned obsolescence.  As long as profit is the driving force behind the way things are constructed, we will likely be unable to save the planet.
  3. The combustion engine & incandescent light bulb.  As long as we cling to technology that has outlived its usefulness (the two examples are representative, symbolic), we will likely be unable to save the planet.
  4. Politics and Religion.  As long as we cling to the idea that the groups we belong to are “more special” than someone else’s group, there will always be conflict; and, the choices necessary to benefit the many, over the few, will not be made (implicit in this aspect is the problem of economic disparity).
  5. (and perhaps most important)    The focus on residential construction.  In terms of the creation of greenhouse gases, both residential and commerical structures only represent about 10% of the pie.  Why not focus more on the big pigs of the pie—transportation (20%), industry (28%) and the making of electricity (32%)?

Ultimately, I think conservation holds the key, no matter where we are placing our focus.

I can best answer why I think this is so, with a question.  But first what is the problem?  Isn’t the goal to consume less fossil fuel and reduce greenhouse gases what the green movement is all about?  There are also a myriad of other concerns that get gunny-sacked with the notion of clean air, water and simply not running out of natural resources.

Things like indoor air quality (wasn’t such a big concern prior to tightening up our houses).  Some even say, “well lets open them up again.”  Unfortunately there is no going back—or at least not back in any way that most people would find acceptable.  If we want to consider The Road as a viable reality—then yes, opening our houses would probably work. I think that would come with its own set of challenges however.

There are also conversations about what materials to use in our homes.  Thus there is the war between “natural materials” and “unnatural materials” that gets all bogged down in the all too “natural bickering.”  There are the arguments over what is “sustainable” and what is “not sustainable.”  These are but distractions really.

One only has to drive through any city in the world and  see all the ticky-tacky houses with the ticky-tacky cars buzzing from house to house and lining the streets to come to the conclusion that we are already at “unsustainable.”

The next time you are driving about or looking out an airplane window and seeing the gazillion houses decorating the landscape, think about how many rolls of toilet paper that represents and how many trees cut down just for that one item. Or consider how many batteries that represents–and where they end up when they die.

There are actually people that would legislate that certain materials not be allowed in homes because of purported allergic responses etc. These same people would not for a moment consider that it is perhaps the inadequate ventilation of their homes, the pets in their homes, the VOC’s in their world, their diets of highly refined foods, or the overuse of antibiotics that is, or are, or could be the real problem. (Just to mention a very few.)

While it may be true, that the planet cannot afford 7+ billion people consuming its resources, who among us is willing to leave?  For all our sake’s we better hope it is not true. Like it or not, we are in this mess together and we either have to figure out a way to solve the issues together or we will be much less successful as a species than any of the species of dinosaur were. Most people seem to spend there lives consumed by issues that do not matter as if they do matter.  All around the planet there is strife.  If politics, ego, religion, stubbornness and selfishness were removed from the equation, the strife would evaporate from the artificial containers that confines it.  All that energy could then be redirected to sorting out the real issues of our times.

***

I truly think that the degree to which we think this is not so, is a measure of just how difficult a road we do have to go down.

***

Without getting into a discussion of whether single family homes (regardless of efficiency) are themselves a type of dinosaur, let’s assume for a moment that they are not.  A huge portion of our energy consumption around the world goes to heat, cool and provide lighting etc to our homes.  A big part of the problem is that once a house is built, real meaningful conservation becomes VERY difficult in making a perceptible dent in energy resource usage.  If we get everyone that lives in dinosaur-homes to conserve what they can (improve the efficiency of everything they can) it can make a difference.

Stop building more dinosaurs

Stop building more dinosaurs

In residential construction, the biggest impact can be made by simply not make any more dinosaurs!

Most people would argue that the building codes and energy codes now require homes to be very energy efficient.  I can argue that, with rare exception (where individuals have done more from their own initiative), this is simply not true.  Modern homes are likely to be no more than 25 to 35 percent better—depending on what years of housing stock we are comparing.

It is quite simple to make houses as much as 80 percent better, in terms of heating and cooling at virtually no extra cost in the worst of climates.  This should mean that in some more favorable climates these costs should be able to be reduced to close to nothing.

For example, the codes do not require that “orientation” of the home be considered.  In fact modern codes require types of window that prevent solar gain.  Solar gain could be used to heat the house in the winter.

Modern codes do not require proper overhangs to protect the glass from solar gain in the summer to help keep homes cooler in the summer.  Without both of these simple things that can be done at virtually no extra cost, the cost of operating the home goes up whether it is an Energy Star certified, or a Leeds certified home or not.

We typically install thermo-pane windows that fail before they pay for themselves in terms of energy savings and the cost of replacement is not reflected in the original calculations that support the necessity for them.  Might it not be better to be “slightly” less efficient and require windows with removable panels like we used to see in old storm windows or with the Pella Designer Series windows (Anderson used to make one–not sure if they still do or not)?

And what is the solution to this short fall?  Gadgets.  I wish I had a better word for it, but historically we have always attempted to use gadgets to fix things.  For example we can heat water with expensive solar panels (that still have a relatively short life span before they have to be replaced–think planned obsolescence again) to lower our water heating costs.  In fact it is not hard to get >75% of one’s hot water heating done by solar panels; and as long as this is done through tubes as opposed to photo-voltaics, it probably makes economic sense over the long haul.  Baring a tree limb going through a panel cover, tube-type solar panels can be made to last almost indefinitely.  The same cannot be said for expensive photo-voltaic panels (without even getting into the whole discussion about how environmentally “dirty” it is to make them or how long they last).

What if electric water heaters were required to come from the factory with 6” to 8” of foam insulation instead of 2?”  The payback on any kind of panel would likely just plain never happen except possibly with tube-type panels (not glass type tubes) that are designed to last the life of the home.  Payback is too often only relative to inefficient homes.  In terms of improving heating and cooling efficiency, the more inefficient your home is the quicker the payback on your “investment” with any kind of gadget that you install.  That is why installing inexpensive things that have an unlimited life expectancy, like good quality insulation or improving air-sealing of the home, makes more sense than installing complicated HVAC systems that have to be replaced by, or before, their payback time-frame.  When you do what conserves the most first, the latter becomes less necessary, or results in downsized versions—and quite possibly become unnecessary all together.

Saving the planet is not really about any of  what I have just written however.

All of this stuff is easy compared to the real job of getting people to change themselves.

After nearly 45 years of involvement, I can only conclude that most human beings pretty much don’t give a damn.

The power companies and industry certainly don’t give a damn.

I am quite sure it is time (way past the time) to start picking on them to accomplish their fair share.  Imagine if the 80% part of the pie conserved 25%!

 

Charles Buell, Real Estate Inspections in Seattle

 

 

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One might be able to buy a thousand filters for the cost of a new furnace.

There are tons of simple maintenance items around the home that if neglected will cost more to fix than it would if they were regularly maintained.

I am not talking about big maintenance items like keeping the house painted or the roof repaired etc.  I am talking about the really simple stuff like changing the furnace filter regularly.

Very Dirty furnace filter

Very Dirty furnace filter

There is no set rule as to how often the furnace filter needs to be changed.  It will vary due to lots of factors—all related to how much the heating and/or cooling system is used and how much crud is in the air.  People that have pets or live next door to lint factories will likely need to change their filters more often.

As a general rule I tell clients to change them at least every 6 months at first.  If they are still really dirty after that time frame, change them more frequently.  If they are not dirty at all, try stretching out the time period until you find what works for your particular life style.

I got thinking about all this due to a maintenance sticker I saw on the side of a furnace the other day.  It had two notes indicating that the service technician changed the filter.  In the first instance the technician recorded that they advised the tenant as to how to change the filter.  In the later instance it appeared as if the service call was entirely related to changing the filter.  Now that would be an expensive way to maintain the filter.

And now it is filthy again

And now it is filthy again

Changing the filter is a very easy thing to do, and every homeowner should take this on if they don’t want the high cost of the service technician to do it.   Damage to the furnace heat exchanger can occur as a result of clogged filters, so not waiting until the service technician is there to do it is considered prudent. If the cost of replacing the filter by an HVAC technician is too high, how about having to replace your furnace to get it changed?

One can buy hundreds of filters for the cost of a new furnace.

 

By Charles Buell, Real Estate Inspections in Seattle

 

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The Standards of Practice is a Guide—not a Bible

The Standards of Practice that home inspectors operate under are  a “minimum” standard.  It is important to understand that most home inspectors in order to provide better service to their client will go beyond these minimum standards.

Some home inspectors would have the world believe that the inspector opens themselves up to a Pandora ’s Box of liability if they mention anything that is not included in the Standards of Practice.

I come from the position that there are worse things than opening oneself up to perceived increase in liability.  To walk around the home and property with blinders on may more likely “increase” the inspector’s liability.

At a recent inspection, on a fairly large property, there were a couple of detached structures including a well house that serviced four or five other homes in the area.  As I walked around this structure I noted several covers and tubes in the ground.  One was about 16” in diameter with no cover.  Another one had a cover but it was not attached to anything.

Hidden dangers

Hidden dangers

Typically detached structures are not included in a Standard Home Inspection, and the inspector will usually negotiate whether they are excluded, included or partially included.  The cost of the inspection will be set accordingly.  On site, this usually involves a lot of pointing and shouting at these structures–with no written report.  In the case of a well house that is community property, any defects seen might be deferred to the homeowner’s association for further evaluation and repairs.  This would all typically be beyond the scope of the inspection and likely outside any Standards of Practice–except of course that these standards typically pretty much allow us to exclude whatever the parties agree to.

In the case of the above picture, one can see the open, water filled, tube at the top left and the underground storage tanks with unsecured cover next to it.  These are a safety concern for any children that might be playing in the area.  The large black covered tube at the upper left corner of the picture is the access cover to an underground storage tank for irrigation and as you can see the cover when removed in the picture below revealed that the tank was full of water.

Tank full of water

Tank full of water

Not only is the tank full of water and the opening big enough for a kid or pet to fall into, but the electrical connections to the pump in the tank are submerged in the water.

Does it increase an inspector’s liability to report on this or to not report on this–even though it is outside the Standards of Practice or what was agreed upon by the parties?

I for one am willing to increase my “liability” in pursuit of information that will protect my client–and possibly even protect those that are not my client.  For me, being “right” is of little comfort if someone dies.

By Charles Buell, Real Estate Inspections in Seattle

 

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Inspector or detective?

Inspectors are always playing “detective.”

In fact, in some countries detectives are known as “inspectors.”

We know the usual suspects.

Every home has the usual suspects. They are not always guilty, but we have to check them out none the less. We never want to discover that some crime has been missed—only to grow into a serial crime spree of untold proportions.

There are the nasty stains on the ceiling that have to be questioned.

We routinely use expensive devices to check around toilets and along shower stalls and tubs. It is very common for crimes to be committed in these areas.

Where chimneys penetrate the roof and ceiling are other areas that need to be checked.

Sometimes the perpetrator is guilty as charged; sometimes it is some past condition where the perpetrator has been “rehabilitated” and perhaps moved on to “greener” pastures in other jurisdictions.

But there seems to be no shortage.

Guilty as charged

Guilty as charged

What is really nice is when the perpetrator just steps right up and “confesses.”

 

By Charles Buell, Real Estate Inspections in Seattle

 

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