Flipped houses can cost buyers. How can you spot bad work?

Two homebuyers put in an offer on a four-bedroom house a few blocks from a scenic bay on the South Shore. They were drawn to the beautifully renovated kitchen and bathrooms, a new roof and siding, new paver walkway and hardwood floors, for the asking price of $600,000.

But when East Meadow-based home inspector Domenic Settimo performed a routine check, he said he discovered that "everything was done unprofessionally." Fixing the issues would have likely cost the first-time buyers tens of thousands of dollars.

Settimo ultimately told them to walk away from the deal. They did.

Homebuyers often want a move-in-ready house, choosing an updated one over a fixer-upper. But what if the renovated home was completed with poor quality materials, quick and cheap labor, or worse, was hiding unfinished work, dangerous wiring or mold behind the walls?

That's what some unsuspecting homebuyers stumble upon when purchasing flipped houses.

But there are ways to avoid it, like becoming a bit more savvy yourself, asking the seller for proof of work done and hiring honest and seasoned professionals to evaluate the house.

Settimo, of Right Start Home Inspections, said he sees this all the time: Flippers — people who buy a house in need of repairs, upgrade it and sell for a profit — "make it look like a brand-new house, cosmetically."

But many cut corners and hide what they don't want to repair properly.

"I don't know how people sleep at night when they do that kind of work and try to sell this to an unsuspecting young couple," Settimo said.

Cheap for the flipper, expensive for the buyer

I don't know how people sleep at night when they do that kind of work and try to sell this to an unsuspecting young couple.

— Domenic Settimo, of Right Start Home Inspections

In the case of the South Shore home, many of the features the buyers loved were compromised, said Settimo, 51.

The kitchen, whose granite counters and stainless-steel appliances first enticed the buyers, had "a lot of shoddy work."

"They skipped at least 10 steps that would've caused anyone using a kitchen on a regular basis a lot of grief," he said.

The exhaust above the stove had a hood attached to drywall, with no vent for exhaust. "It was sucking up the air and blowing it right back into the kitchen," he said. The new refrigerator had no water line connected to the water dispenser and ice maker on the door.

A new heating and cooling unit in a bedroom was causing water to drip from the ceiling.

"That told me someone pierced the condensation line for that unit," Settimo said.

The plumbing under every sink in the house wasn't done correctly, he said. The flippers used a $2 waste line that looks like an accordion, something that a licensed plumber would use for a quick fix while waiting for the right parts.

But the deal-ender for this house was what was under it.

Settimo went into the crawl space and saw that it had been flooded, had heavy termite damage and was simply "a structure that was compromised in a lot of areas."

A defunct boiler was the cherry on the cake, leading Settimo to suggest the buyers pull out of the deal.

Fixing all of this properly would cost tens of thousands, the most expensive parts being the termite damage and other structural damage. Replacing the boiler alone could have cost around $5,000.

Not all flips are created equal

Melissa Principi, a licensed real estate salesperson for Douglas Elliman, has worked with her family's design-build company, Southold-based Principi Builders, for a decade.

Principi, 37, has flipped three of her own houses. She took pride in investing in the first house in Huntington where she lived, carefully renovating it and selling it for a profit. She bought the 1970s Colonial in 2016 for $375,000, made $75,000 worth of renovations and sold it for $575,000 in 2019.

"We loved it, we enjoyed the fruits of our labor," she said.

She bought another 1970s Colonial in Huntington Village in 2019 for $450,000, spent $200,000 improving it and has kept it as a rental property, with a $750,000 appraised value. She bought her current home in Laurel for $610,000 in 2021, spending $250,000 on renovations there, ending with a $950,000 appraised value.

That's not how many flippers operate, Principi said. They usually don't live in the properties they buy, but quickly improve them cosmetically and then sell them for a profit.

The issue with flippers is "time is money," she said. "They get a hard money loan or finance it themselves and they need to rush and do it quickly."

Hard money, or short-term financing, comes at a higher interest rate than standard 10- to 30-year mortgage. They're otherwise known as bridge loans, and are unlike traditional mortgages, having a shorter approval process with less stringent requirements and making them ideal for a quick purchase.

But for home repairs to be done properly, permits are needed and that's a big delay, Principi said, one that some flippers won't accept.

So, they do the work themselves or with unlicensed contractors.

In 2021, her first-time buyer clients made an offer on a "really pretty" flipped house listed for $550,000 in Port Jefferson. Then they hired a home inspector who found alarming issues with the three-bed, 1½-bath home.

All electrical outlets within 6 feet of a water source should be GFCI outlets, protecting from electrical shocks. But there were none in the house.

"It saves lives, there's a reason why it's to code," Principi said.

While the house was newly renovated, it was also missing hard wired smoke detectors, required by state law, that communicate with one another to alert all detectors throughout the house.

All signs pointed to, "someone put this together really quickly."

Principi checked with the town and they had no record of any permits for the work — a huge red flag that the flippers didn't use a licensed plumber or electrician to do any of the work, like install the new central air and heating.

Her clients didn't buy the house.

Michael D'Angelo has built and renovated houses for years with his father and now owns and operates New Hampton Homes, based in Centerport.

His renovation projects range from $500,000 to $1.5 million, including houses they flip for their clients.

As long as the paint looks good, the water runs and gets hot, they think they're buying a good home.

— Michael D'Angelo on how buyers can be fooled by flips

D'Angelo, 41, works with the same licensed electricians, plumbers and HVAC experts every day, unlike many flippers who hire the cheapest person.

"Most of these people doing flips aren't licensed contractors and have very little experience in actual construction," D'Angelo said.

But the typical buyer can be hoodwinked if they don't know what to look for.

"As long as the paint looks good, the water runs and gets hot, they think they're buying a good home," he said. 

He suggests bringing along a contractor you trust when touring a house for sale — not one who only does kitchen and bathroom renovations, but someone who build homes, opens up walls, does major renovations.

He acknowledged that most people want move-in ready homes because they don't want the headache of doing it themselves. But they can get a bigger headache by buying a house that was improperly repaired.

"People shouldn't be afraid to do the renovation," D'Angelo said. Not only will buyers get a better-quality home from licensed contractors they hire themselves, he added, but they can reap the benefits of spending money on the right things to increase the value of the house, rather than paying the flipper a much higher price for poor quality work.

What does a seller have to tell you?

While dishonest sellers can be found everywhere, Principi is encouraged by a newly expanded law that should theoretically make it harder to hide shoddy work and sell to unsuspecting buyers.

Since 2002, sellers have had to fill out a Property Condition Disclosure Statement, disclosing what they know about the house, for instance, the basement floods during heavy rain.

But virtually no one does this because the form allowed sellers to give the buyer a $500 credit for any necessary repairs in lieu of answering questions about the house.

Since the law was amended this year, that $500 option is no longer there.

"Sellers must disclose any knowledge they have about the house," Principi said. "The jig is up."

Since the change is new, she hasn't seen litigation yet, but it stands to reason that if a buyer can prove a seller lied about issues with the house, they can get restitution.

"I think we'll see a lot less bad flips," she said.

Settimo isn't so convinced.

"The seller disclosure report is only as good as the paper it's written on," he said. "The seller could just say, 'this is all I know, I'm not an expert.' It's useless in my opinion."

Both agreed a buyer's best tool to avoid purchasing a lemon is to hire an experienced, qualified home inspector to do a thorough look at the house.

Even if the seller is rushing you or you're competing against three other offers, Principi said, "Don't ever give that up."

What can you spot on your own?

But even before buyers make an offer and hire a home inspector, there are things they can look for to ensure a house isn't hiding issues.

Bubbling paint or any wet marks anywhere are a red flag that house has a water issue, Principi said.

Often an empty house — without furniture or clearly staged with no people living there — is a house that is being flipped, Settimo noted. While it's not foolproof — for instance, it could be a house someone inherited from a recently deceased relative — it's a sign the home is likely a flip.

A house lived in by a family in most cases will have been cared for better than one by a flipper whose priority is a profit.

Settimo suggested spending a lot of time in the basement, checking to see if hot water heaters, boiler and electrical panels look old.

If it's a finished basement, and every section has been closed off with drywall, even the utility closet, that's a red flag the seller is trying to hide something.

There's no legitimate reason to have every inch of non-living space covered with drywall, he said.

If cheap vinyl flooring was installed and it's lifting up or shifting, it's not secured properly to the floor, and they're covering something, he said. For example, the floor underneath could be in poor condition.

Some flippers do things the right way, he said, "But there are so many out there looking to make a quick buck, you have to be very, very careful."

Finally, buyers should ask to see permits for the work that was done. If the seller can't provide them, the work was most likely not done by a licensed professional, and was done quickly and cheaply.

"If there's no paperwork, that's a problem," Settimo said. "Go to the next house."