Ethical House Rehabbing
If you were looking to sell your home and went the hassle free route of using a "We buy houses" company, would you rather sell to a big company or a local small business? Living and investing in Washington DC, I have seen the best of both worlds and while working with my partner Steve we started discussing "Ethical House Rehabbing". Steve takes the lead on the construction of our projects but we share the same vision on how our rehabs should go. Part of our plan on every rehab is to create a peace of mind for the future homeowner (not to mention limit our future liability), but doing so is generally the least cost efficient way.
How do we accomplish this? By not skipping corners and putting "band-aids" on our projects. We fix and replace the properties the best we can and take extra steps to ensure the house is in the best possible condition the second it is sold.
The practice of putting "band-aids" on flipped houses is common in DC. Due to housing shortages, and continuously rising real estate prices; the DC area has seen a boom over the last 10 years in large rehab companies and small businesses coming in and snatching up any deals they can find. In an effort to maximize profits, many of these companies will intentionally cover up issues to pass inspection, that then become the burden of the future homeowner. Unfortunately, I experienced this first hand with the purchase of my first home in DC (back in 2010). Many of these homes are 100 years old or older, and many times the rehab company never plans on replacing the wiring, plumbing, and HVAC. But to bring the house up to code, they will still have to do the bare minimum upgrades which, unfortunately, aren't always 100% compatible with the old wires and pipes. And then to make sure inspections are passed, the larger companies will do all the little things to make sure they pass even if its not right or safe.
Don't get me wrong, there are large companies that do good work and I am in no way saying that all large companies are putting out poor quality homes. But, the larger your operation, the more you have to rely on more people and things can get overlooked.
I don't know about you, but I would much rather take the extra steps to ensure the product I am selling is safe and livable; just like my own home.
Thanks for reading and feel free to comment! I especially want to hear from the larger operations, so you can discuss your experiences!
-Shayne
Comments (3)
This is generally why I focus on new builds. In a new build there isn't an excuse to hide a problem, plus my jurisdiction has warranty and security deposit (cash) requirements. I often am intrigued by house flipping but I look at properties and usually I would want to save nothing in the house except the frame (and even then the layout is rarely acceptable). Taking a house back to the studs is often more costly and the end product inferior to simply starting new. I guess that is why I have bulldozed three houses in my area and haven't done a single rehab.
So to answer your question I don't know if ethical rehab is possible unless you have a massive upside on the ARV, know and budget for the problems you can't even identify until demolition is done, and have low cost skilled labour to fix problems. In my market I lack all three of those criteria. Literally, we don't have a huge margin, we can't pre-emptively know and cost out the problem areas behind the drywall before we close, and labour cost is high for skilled workers. I would like to meet some local flippers and see how they grapple with this issue. I suspect they paper over problems and cross their fingers that it will be OK. I haven't met a flipper that would chose to lose money on a deal in order to rehab to the extent necessary to fix any problem.
Sean Kollee, over 9 years ago
Ive seen many a flipper do sub quality work in DC. Next time you have a flip on the market, Id love to take a look.
Russell Brazil, over 9 years ago
I've been living in DC since 2000 in the Shaw neighborhood and have seen many a crappy reno job done by flippers. It is even more enlightening when going to open houses with my neighbor the architect, who spots the problems I don't see.
Sadly there can be little respect for the people who will live in the house, the neighbors and the house itself in the process. Little respect when something that wasn't addressed in the renovation, like wiring, later harms the future owners. Little respect for the neighbors when it comes to trash in the alleys, or on the sidewalk. And little respect for the house when maybe 75-100 years ago it was a real jewel or little respect in overwhelming the house and weakening the structure.
Thanks for being in DC and caring about the kind of house you sell. Hopefully buyers will care too.
M Marie M., over 9 years ago