Updated, Remodeled, or New - What Questions Do You Have?

Growing up, my parents would do "light flipping" in Texas with investment properties. I would accompany them to Lowe's or Home Depot, and they would talk about their projects over the dinner table. Now, I have quite a bit of experience with remodeled homes in the Tucson Area. Whether it is an open house at a remodeled home, helping buyers for a new home, a seller with marketing a home as they're finishing construction, I have helped in various flips and remodeled, and new builds. Below are some questions I am typically asked, or misconceptions to clear up if you are considering these homes.

This page is still under construction and being developed. If you have questions not seen here, please email or call Robert.

The home is "New" or built by a residential developer, and the purchase contract was written by a licensed REALTOR®. Do I still need an inspection? Wouldn't the sales agent tell me if it was needed?

Homes are large with many parts. The sheer size and complexity of a home means that there may be unseen issues. Newly built homes are no exception. I ALMOST ALWAYS recommend a home inspection regardless of whether it is new. Below are a few things to keep in mind about why I recommend:

1.) In a typical transaction, the sales agent for a community builder's office will have buyers sign stating they acknowledge the sales agent works for the seller, not the buyer. While licensed, they do not owe responsibilities to the buyers the same way an agent-on-client's-behalf relationship does. This is sometimes posted on the door.

2.) Builder warranties can vary, depending on the builder and the part of the home that is defective. Just because one company was responsive when a part was defective, doesn't mean the next community will be responsive when a different issue arises.

3.) Fixing the problem prior to closing is 100-times easier than after closing. Just ask the people in a DR Horton Community in Youngsville, LA or in LGI Homes in King County, WA. Seeking repairs or compensation after closing can turn into a prolonged class action lawsuit. Having inspections and repairs prior to closing can be much easier.

4.) Just because the work is done by a licensed contractor doesn't mean that some of those on staff doing the work weren't on their first day on the job or cutting corners.

I'm thinking of going to a new build site. Does it cost more if I bring an agent for my behalf?

In the vast majority of cases, it does not cost you more out of pocket to bring your agent. Most new build communities know that they are going to be in an area and price where there is competition, and they anticipate the buyers will likely already have an agent who they trust. When paying the commission for a buyer's agent, it is usually written off as an advertising expense, and therefore does not effect the appraisal or profit/loss of the homes or builders. If builders have many sales involving buyer's agents, then that just means they spend less money on billboards, radio ads, and internet ads, and not that the sale makes any less for the builder.

There are exceptions where the builder does not compensate the buyer's agent for the sale, and you may have to pay your agent depending the agreed terms you have. Consult with your agent about how that would be communicated if you visit a site with no agent compensation.

But do the new build sites want me to bring an agent?

Bringing your own agent usually conveys that 1.) you are more qualified than other 'walk-in' buyers and 2.) it will be easier to communicate with you as a potential buyer as you have a dedicated agent to respond on their behalf. In addition, experienced sales agents would be aware that the confident buyer would need to look at alternatives in order to make a decision (this is better than the alternative). With an agent present, they know they'll get a clear comparison.

Do new build sites expect me to bring an agent?

While there are exceptions, new build communities typically build where there is strong demand, both in location and price. These communities might be higher in price due to marketing as new or more modern, or to account for future promotions or negotiations. For the most part, they expect their potential clientele to have shopped other listings and are working with an agent already.

Some may start their search at new builds, the same way they would with open houses. These are "early stage" buyers, and therefore not likely to represent immediate sale possibilities.

What's the difference between New, Remodeled, and Updated?

In truth, there are no clearly-drawn rules that each possible seller has to adhere to when advertising as "new" or "remodeled" or "updated." Areas and individual seller's definitions may be different, but below are how I use these terms.

"New Home" means built within the past year, or the buyer will be the first or "original owner."

"Remodeled" is typically means the seller has largely focused on cosmetic work and repair. This usually means new carpet, flooring, appliances, light fixtures, and potentially doors/windows, as well as repairing damage that is easily noticeable, such as holes in the walls. In addition, large remodeled homes may have additions that were not there prior to the remodel, adding the larger space that is expected in more modern homes. Some sellers have more lax definitions of remodel than others, and involve only a few areas of work as "remodel" while others have a more extensive concept/execution when remodeling a home.

"Updated" is typically focuses on addressing elements that are found in newer homes but not older homes. For example, a home with "updated" electrical could mean an electrical system has been "updated" to the modern safety features and the expectations of modern electronic appliances. Updated kitchen could represent counters and cabinets designed for modern appliances layout expectations.

A home is advertised as new/remodeled/updated. Does it have to be of a certain level of quality? Are there assurances?

No. Even if a home is completely new, as I mentioned in the first question, inspections are still recommended. Extensive work doesn't always mean it was performed well.

The state of Arizona has requirements for using licensed contractors depending on the scope of the work. When buying, discuss with your REALTOR® about how to find the names of those contractors, and how to do research about whether you're comfortable purchasing a home that has work by those contractors.

Not all decisions on remodels or updates are popular or good decisions. Just because it is a remodeled kitchen doesn't mean that buyers will like the color or design choices. A brand new glass-top stove doesn't add value in the eyes of a buyer who prefers cooking with cast-iron skillets (which scratch glass-tops!) who would prefer an older gas burner stove instead.

Be sure to read the question below about planning remodels with the focus on selling for more.

I saw a remodeled home that was listed by one agent as "owner/agent?" It was of good/bad quality for my tastes. Does that mean all listed "owner/agent" homes by this agent are like this?

Remodeled or flipped homes can be complicated projects, with multiple parties at multiple steps. One party may buy the home at auction before any work was done, another party does a the remodel or "flip" work on the home, and a third party provides the financial help the one or both of the first two parties. Having an "owner/agent" sign means that the agent is involved in one of those aspects, but not necessarily involved in the others.

The next sign with that agent as "owner/agent" might have different parties involved in each part, for both work and decisions. The expectations for work required or the return on investment expected might change from property-to-property, both for the homes individual specifics as well as the different parties involved.

I have a question about permits and work done on a home, and whether I need a permit.

The specifics of each home, disclosures, permits/zoning, and appraisals are different for every sale, and cannot be simplified in the space here, and is part of why you should use a licensed REALTOR with every transaction. Also, see the City of Tucson Permit Page and Pima County, Do I Need A Permit? pages

Do I need to use a licensed contractor for work I'm planning on my home?

If you have to ask, the answer likely yes. There are helpful resources at the Arizona Registrar of Contractor's FAQ Page and the "Handyman Exception" outlined in ARS §32-1121.

Another Agent told me not to worry about Permits/Contractors? Is Robert (and this website) being overly cautious?

Be wary of Real Estate Agents who assure you without asking you to do your own research. Permits, zoning, and legal responsibility are elements that remain after closing, and it can be very difficult to hold an agent responsible for bad advice after the home has closed and everyone has been paid. Erring on the side of more caution benefits you as a seller in multiple ways.

1.) It is easier for you to disclose work done, and allowing questions directed to a contractor.

2.) You can pitch the contractor's warranty to buyers as a selling point.

3.) It is safer from a legal standpoint, allowing you to focus on your new home or next real estate project.

How is "Flipping a Home" different than remodeling? Are they the same thing?

"Flipping" usually refers to when a buyer or investor purchases a property, generally in poor condition and for less money, with the intent of improving the condition of the home with the intention of selling the property for more money.

It is similar to "remodeling" in the work done, but "a flip" implies it was in poor or distressed condition prior to the work done, which limited its selling power.

I saw a "Flipped Home" and it sold for very little before the work, and now it is very high on sales price. They must be making a killing, or absolutely ripping off someone, whether it is the previous owner or the buyer, right?

Not necessarily. The "quick cash offers" transfer a different type of deed than what occurs in typical sales. These "quick cash offers" may record the price paid to transfer ownership, but if it seems ridiculously low, it probably doesn't include other debts on the property that were paid. These might include unpaid debts to the HOA, the owner's mortgage, a recent refinance debt, or unpaid contractors.

A Flipped Home was just listed and the price is really high. Why?

There's two possibilities.

1.) The seller and listing agent know what they're doing. They may price the listing high because they are confident in the value of the work done, the demand for remodeled homes in the area, and aren't afraid to let cheaper homes sell first so they make more money. The home is looks nice in pictures, shows well to clients, and the seller is patient at the high price. There might be uncertainty for just how much a remodeled home would sell for, and they price high with the intention of slowly lowering the price if it doesn't sell so they can account for this uncertainty. Sometimes they sell quick at high prices, sometimes they sell slower, and the sellers are excited or disappointed by the results. But the high price can be part of a sound business plan.

OR...

2.) The seller and/or listing agent don't know what they're doing.

Is a Flipped home better or worse in inspections?

The biggest difference is the disclosures. If the Seller has never lived in the property, there is very little detail or history they can provide, except for the work that was done during their time there. Individual buyers may more or less prefer a home with less new features but a longer history (and the repairs during that history). Have a detailed conversation about the individual homes with your REALTOR, as well as how you would want inspections to go.

Remember, regardless of whether remodeled or with a long detailed history of the home, an inspection is always recommended.