What Can You Do if You Bought a Bad Flip?

man holding young child while painting wall orange

Flipping a house is when someone buys a cheap or dilapidated house, fixes it up and resells it for a profit. Buying a flipped house might cost more than buying your own fixer-upper and doing the work yourself, but you ideally get a move-in-ready home, often with modern finishing touches. It's a trade-off that many homebuyers are willing to make.

However, because home flippers tend to work on homes with the goal of maximizing profit in mind, results depend on the skill of the flipper or their contractors. Some might focus on making cosmetic improvements with new fixtures or paint to make the home more appealing to buyers, while ignoring bigger problems.

How Do You Spot a Flip?

When you're looking for your next home, you'll want to know if you're buying a house that the seller lived in or if it was recently purchased to be flipped. Some signs of a flip are:

  • The seller hasn't owned the home for very long.
  • A limited liability company (LLC) owns the home.
  • Only the bathrooms and kitchen look new.
  • The neighbors tell you the sellers didn't live there before.

Not every flip is a bad flip, but knowing how to separate the good from the bad can save you a great deal of heartache and financial pressure.

How to Protect Yourself From Bad Flips

The best way to avoid unexpected expensive repairs is to know what you're getting into. Flipped or not, before you buy a home, you can:

  • Look for sloppy work. An untrained eye can spot some issues, such as crooked cabinets or a messy paint job. You could also peek under the sink or into the attic to see if you spot any leaks. If the flippers didn't pay attention to these details, they might have overlooked or rushed larger issues as well.
  • Get a professional inspection. Paying for an inspector to take a detailed look at the home before you buy it is often a good idea. If they find something, you might want to pass on the home or negotiate with the seller to have them fix the issue or lower the cost.
  • Ask for details about what was done. You can ask for a list of recently completed projects, the contractors they hired, and receipts for the work. However, the seller might not want to disclose that they flipped the house or tell you what they did.
  • Check for permits. You can look for copies of past permits, which are usually available online through your city's records office. The flippers will often need permits for construction projects, especially for major changes like taking out a wall or adding a new room. A lack of permitting could be a red flag and lead to big issues, such as having to pay to remove the addition after you move in. You could also get a municipal inspection, which will check to see if the work was permitted and whether the results comply with building codes.
  • Look into a home warranty. If you're worried about the appliances or HVAC, you may be able to buy a home warranty plan that could cover some of the costs of repairing or replacing covered appliances.
  • Check seller real estate disclosures. Most states require sellers to give potential buyers a disclosure report, which lists different issues such as cracks in the foundation, broken appliances, asbestos and more.

What Can You Do if You Bought a Bad Flip?

Whether you can hold the seller (or someone else) accountable for shoddy work depends on many factors. For example, if you knew the roof was leaking when you bought the home, you're likely responsible for fixing it on your own. But if you were told the roof was in good condition and got caught off guard with an expensive repair, someone else might have to cover the costs.

If you're running into issues after buying your home, the first thing you'll want to do is determine what went wrong, and who might be responsible.

Figure Out Who Is Responsible

There may be several parties you can hold liable for repairs:

  • The seller could be liable if they knowingly lied about the issue or covered it up.
  • The seller's agent or broker could be liable if they saw or were told about an issue and didn't tell you.
  • Your inspector could be liable if they missed an issue that their professional peers would have caught.

Whether you can actually hold these parties liable may depend on other factors as well, such as whether you can prove the issue started before you bought the home and that it hasn't been caused by normal wear and tear.

Applicable disclosure requirements also come into play. Most states require sellers to describe issues and hazards on the seller's disclosure report, which buyers can see prior to purchasing the house. However, the list of covered issues can vary by state, and sellers may only need to disclose information to the best of their knowledge—they don't necessarily need to hire an inspector.

You might not have any recourse if the issues were already disclosed on the form. The seller and their agent also might not be responsible if they didn't intentionally withhold information from you and you bought the home "as is," or if the state has a caveat emptor (buyer beware) approach.

Similarly, you might not be able to hold your inspector liable if they listed the issue on their report, or if they weren't required to inspect that part of the home.

Decide Whether to Take Legal Action

You could contact a real estate attorney to get an expert opinion on the situation. But even if you have the right to sue the other party and win, a lawsuit can be costly and time-consuming.

It makes sense to start by sending a demand letter, which is a statement usually drafted by a lawyer that requests restitution. The other party may decide that covering part or all of the costs is better than dealing with a lawsuit. You could also propose mediation as an alternative.

In some cases, it might even make sense to see if an appliance's warranty, a home warranty or your homeowners insurance covers the issue. You may have to pay a deductible, but it could be the fastest and easiest option.

If you decide to file a lawsuit and win, you may be able to get compensation to cover your costs and an additional award if the seller was acting with malice. It's not common, but you might be able to have the entire transaction canceled.

Is Buying a Flip a Bad Idea?

A flip isn't necessarily a bad option, especially if you want a move-in-ready home. Many professional flippers are trustworthy, and work with experienced crews who regularly repair and upgrade homes.

Keep in mind, though, that flippers are also incentivized to do renovations themselves and do them as quickly and cheaply as possible to maximize their profits—especially if they only plan on doing this once or twice and don't have to worry about their long-term reputation.

Do your due diligence before putting in an offer on a house. While you might be able to hold someone else liable for costs after you buy the home, it's often too late. And even if they're responsible, getting the flippers to cover the costs can be an entire project on its own.

As you prepare to buy a house, make sure your credit is in the best shape possible. You can check your credit report and credit score for free through Experian. Not only that, an Experian CreditWorksSM Premium subscription gives you access to the same Experian FICO® Score mortgage lenders use, so you can be prepared.