Before the Great Recession of 2008, housing prices climbed dramatically, and homes sold faster than buyers could gush, “I love that spa bathroom.” Contractors and even handy DIYers got in on the uptick by buying fixer-uppers and improving them in the quickest ways possible, selling them, and reaping the profits. Enter the real estate phenomenon of flipping.

The trend waned a bit as the housing market hit the skids, but then returned with some significant differences. Today’s flippers are more often professional investors with access to cash as banks tightened mortgage loan guidelines and available work crews, says Seth Captain, managing broker of Captain Realty in Chicago.

HGTV-Inspired Flippers Get Harsh Dose of Reality

A new generation of house flippers is facing losses from properties that are taking too long to sell.

But now, Captain notes changes: “Low inventory and many buyers’ eagerness for new construction and remodeled homes has caused some buyers not to do enough checking,” at least in Chicago, he says. And some buyers don’t insist on an inspection if sellers won’t permit it as a contingency, adds Frank Lesh, owner of Home Sweet Home Inspection Company in Indian Head Park, Ill., and executive director of the American Society of Home Inspectors (ASHI), a national organization based in Des Plaines, Ill.

Your job is to guide buyers through this rough terrain. The first thing to do with a remodel is to look at the public record and see when the property your buyers are interested in last changed hands. If it’s less than a year ago, the property may require a more thorough examination. While not every flip represents a potential landmine, you can help clients by asking for information about who completed the work, says broker Mark Ferguson with Pro Realty Inc. in North Greeley, Colo. Ferguson, also a real estate investor and blogger at InvestFourMore, says most problems arise with work done by DIY owner-flippers, who lack the skills of licensed contractors.

Here are more ways you can be an advocate for buyers who plan to purchase a house that’s being flipped. Many of the caveats reflect the same type of thoroughness that should be undertaken with any sale.

1. See it yourself

Don’t buy at auction or without seeing a house in person, says Eric Workman, senior vice president of marketing at Chicago-based Renovo Financial, a private lender. Buyers should inspect the structure so they see firsthand if visible problems exist that may be red flags for deeper trouble. This is the first step before they call in experts.

2. Learn the history of a home

Workman suggests asking officials in your community and real estate salespeople if they know how long a home may have been vacant. The number of seasons a property goes through while being empty of occupants can help predict whether its plumbing and other mechanical systems may have been neglected or damaged.

One of the most important reasons to trace a home’s lineage is that if no one has lived in the remodeled house yet, it’s hard to know how well the systems work, Captain says. “There may never have been a heavy rain to know if the home’s drainage system will stand up, or if termites are chewing away at support joists and not visible,” he says. He suggests buyers ask for names of others who’ve bought from the same flipper to learn how well their houses have fared over time.

A buyer can also request to see the permits that the flipper pulled to perform work, especially important in cases where the floor plan was changed or a load-bearing wall was removed, Ferguson says. Or, if mold was a problem, a buyer can ask if the work was done by someone licensed to handle mold remediation, he says. They can also check the area’s Better Business Bureau to see if complaints or lawsuits have been brought against the seller by a prior buyer or real estate commission.

3. Understand the flipping process

Is Your Buyer a Flipper?

Mark Ferguson, a real estate broker at Pro Realty Inc. in Greeley, Colo., cautions wannabe flippers about the difficulty of making a sizable profit. “You may see flippers on TV shows appear to make a lot of money, but it is extremely rare to make $100,000 or even $50,000 unless you are dealing in high-value, high-risk properties.” Most shows leave out the costs associated with a flip such as financing, real estate sales commissions, closing costs, homeowners’ insurance, property maintenance, taxes, and possibly homeowners’ association dues. These additional costs can be 15 to 20 percent of the sales price. “A $100,000 profit on TV may only be a $50,000 profit in real life,” he says. Ferguson, an experienced flipper, has found his average profit ranges between $20,000 and $40,000 on a purchase that cost him between $75,000 and $150,000. In addition, many buyers don’t understand the time frame, he says. “It can often take me six months or more to sell a flip once I buy it,” he says. But it may be worth it if you’re motivated by more than money, he adds: “It can be fun, done on a part-time basis if you do the repairs yourself, and you can make money with realistic ideas of costs and profit margins.”

Because a flipper’s goal is to make a profit in a relatively short period, many changes are cosmetic, such as refinishing hardwood floors and painting kitchen cabinets. Captain notes flippers often replace countertops, appliances, and fixtures in what tend to be buyers’ favorite rooms: the kitchen and bathrooms. They may forgo fixing the more expensive, time-consuming, and less visible problems. For example, a rotted subfloor may be deemed not worth fixing if it’s underneath gleaming boards, and dated plumbing may be left as long as faucets work and water pressure seems okay, Captain says: “They don’t want to kill the deal, but won’t go above and beyond. They also know that most buyers reach a point where they want to be done looking and are happy to focus just on what’s new and pretty.”

4. Hire a certified home inspector

Even if the flipper says the home was preinspected, advise buyers to bring in their own expert to avoid surprises later. But even home inspectors can miss signs of problems beyond the surface, Lesh says. “Perhaps water wasn’t run long enough during the inspection to find out that pipes hidden behind newly tiled walls are corroded,” he says. A good inspector will follow up on possible trouble spots — say, a wall that sounds hollow and may be lacking solid backer board and studs — with requests for more information. “We might ask, ‘What’s going on here?’ We won’t rip off the wall, but will request receipts to show work was done properly.”

Inspection fees typically vary by a home’s price, size, and age. Lesh charges between $650 and $700 for a 15-year-old $500,000 house. Cultivate a list of inspectors you trust, and give it to buyers so they can choose the one they want to work with.

5. Bring in additional specialists

Certain systems warrant calling in a skilled expert. Glen Gallas, vice president of operations for the Mr. Rooter franchise based in Waco, Tex., advises having a plumbing inspection even if all seems perfect. “With today’s technology, a licensed plumber can do a video camera inspection of the main sewer line to see if there are mechanical defects in the pipe, which most home inspectors don’t see,” he says. “There might be a small leak in the line from roots growing, but it could take several seasons for them to be large enough to cause problems, and that could be long after the purchase. By then, [repairs would] also be more expensive,” he says. An average plumbing inspection ranges from $150 to $400.

In the case of electrical work, a new junction box may suggest all’s well, but that doesn’t mean wiring was brought up to code, says Keith Pinkerton, owner of a Mr. Electric franchise in Huntsville, Ala. “Houses built in the late 1960s and early ’70s often were wired with aluminum, which was outlawed, and copper was required. But some might not know because they’re behind walls. We pull off the panel cover and look,” he says.

Some buyers may be content waiting to hire an expert only if the general home inspector picks up on problems such as foundation cracks that could reflect structural defects. At that point, a structural engineer can determine the seriousness of the problem. And many home owners find that it helps to bring in a structural engineer in cases where a house is very old since more problems may lurk beneath floors, below floors, between walls, and above ceilings.

6. Avoid legal glitches

Before buyers sign on the dotted line, be sure a lawyer has checked that there are no legal problems with the transfer of ownership, advises Alan Doran, executive vice president and general counsel with OneTitle National Guaranty in New York. All kinds of issues may arise when buying a property that has been flipped, he warns: “For example, if sellers acquired a property through a short sale, they need to obtain detailed information on the short sale to ensure that both transactions comply with state regulations and the original lender’s short-sale requirements,” Doran says. There may also be a requirement that the flipper owned the property for a minimum amount of time before selling, and proofs of payment of liens must be verified, he says.

With all this information in hand, your buyers can decide whether a flip is still worth buying, particularly if the seller won’t deduct estimated repair costs or fix problems. But, as Captain notes, if a flip passes muster, it may be just as desirable as any other purchase: “What difference does it make if a flipper made money in a short time if the buyer finds a wonderful home?”

Ed Brodow’s girlfriend recently bought a house.

“The amount of negotiation going on was unbelievable—her and her agent, her agent and the other agent, the people selling the house, the people selling the house they wanted to buy, and the lenders. It never stopped,” he says.

Brodow is a negotiation expert and author of Negotiation Boot Camp: How to Resolve Conflict, Satisfy Customers, and Make Better Deals (self-published, 2014). Even he was surprised by the intensity of the transaction. “It’s important to have a REALTOR® who knows what they are doing,” he adds.

In a world where consumers have an abundance of real estate information at their fingertips, being a solid negotiator is a point of differentiation and value as a real estate professional.

“Everything that an agent used to have control over is slowing dissipating,” says Christine Kim, president of Climb Real Estate in San Francisco. “Technology takes care of the first line of defense of information that agents used to have more control over.”

Sellers still hold a lot of the cards, she says, especially in her area of the country where multiple offers remains the norm and lack of inventory persists. Sometimes, an agent’s negotiation skills can be the difference between winning the bid or not, she says.

Kim also believes this important and valuable trait can be learned. “I was afraid at first, but you have to be open to putting yourself out there,” she says.

Why Some Agents Aren’t Good at Negotiating

Brodow thinks it can be a cultural thing. “We’ve been taught that negotiating is perceived as being petty or being a haggler. It’s somehow cast a bad shadow on people’s character,” he says. A big part of negotiating involves confrontation, which some people just can’t handle, Brodow says.

Growing up in Brooklyn, Brodow says, confrontation was commonplace—a part of living there. The minute he walked out the door of his home, he was confronted with noise, people, traffic, and pollution. “Confrontation was part of my normal day. But those who are in a less urbanized area, they aren’t as accustomed to that,” he says.

Practice Makes a Negotiator

Brodow is in agreement with Kim—negotiation is a trait that most people can learn through experience, trial and error, and building certain skill sets. Here are eight tips from Brodow and Kim on what it takes to be successful at negotiating in real estate.

Be open to learn. Agents have to be able to put themselves in uncomfortable situations, Kim says. A person must have the ability to look back and learn what they could have done differently to become better when negotiating. Have rookie agents shadow other agents who do it well. Ask agents to take classes on negotiating to perfect their own style. Or conduct classes at your brokerage on a regular basis. Even experienced agents can use a refresher.

Phone or meet the other agent in person. Have your agents get the other agent on the phone, Kim says. If they are negotiating with another agent, they should go meet them to build a good rapport. Ask your agents to attend open houses to meet other agents from the community. This will make things smoother the next time they do a deal with them. “We are all allies. You can get an idea of who that person is, and they will remember you. You aren’t a stranger on a text anymore,” she adds. You want your agents to have a good reputation so agents at other firms want to work with them.

Ask for what you want. Agents shouldn’t be wishy-washy, Brodow says. “You need to be willing to put it out there and ask. People are afraid to ask for what they want.” Your agents also have to be willing to challenge what the other side says. They have a position, and the other side has a position, and your agent has to challenge that position. If your agent doesn’t, they’re guaranteed to lose, he adds. Learning how to push back with tact is key in real estate.

Be a great listener. Agents can pick up on things that will give them the upper hand that others might miss, Kim says. “There are so many nuggets of gold you can attain by just being present.”

Give nothing away without getting something. This is key in real estate, Brodow says. “You always get something in return.” If your seller is asking $500,000, but the agent tells a buyer’s agent they would be willing to come down to $450,000, that’s a disaster, he adds. The agent just negotiated against him or herself. An agent should never give up the seller’s rock-bottom price right away. Instead, the agent could say that the seller is willing to come down to $475,000 and to close in two weeks if the buyer pays cash. If the answer is no, then listing agent isn’t obligated to come down. Or, if the buyer is financing the purchase, there’s more room to negotiate between $475,000 and $500,000. Never make unilateral concessions, Brodow says.

Frame an offer eloquently. Kim says that agents have to learn to get their foot in the door with negotiations. She believes it’s how the offer is written or the way an agent talks to the agent on the other side of the table. These skills can make or break negotiations. For example, your agent should tell the other agent, “I know the offer is low, but please take it back to the seller and let’s get the conversation going.”

Understand you have choices. An agent should always be willing to walk away, Brodow says. If there are five other people bidding on a client’s dream house, then your agent might just have to bite the bullet and be honest with their clients and say it’s going to go way over their budget. Your agent can always find them another dream house.

Slow down. Many people aren’t patient in today’s world, Brodow says. They are used to instant gratification. As a negotiator, an agent can use that to their advantage. If the other side is in a hurry, that’s when the agent can figure out what will win the deal because they want it done fast.

The job of your agents is to talk to people. They should be out in the community, talking to residents, asking why they bought or sold their house. “Negotiators are like detectives,” Brodow says. “You have to ask a lot of questions and be persistent.”

Broker-to-Broker is an information network that provides insights and tools with business value through timely articles, videos, Q&As, and sales meeting tips for brokerage owners and managers. Get more Broker-to-Broker content here.

Smart-home technology offers entertainment, convenience, and peace of mind, but did you know that it can help lower energy bills and save homeowners money? The average owner spends about $2,000 on energy costs every year, according to Energy Star. By adding just a handful of cost-effective devices, homeowners can save between 20% and 30% on their energy bills. Here are a few key smart home products you can pass on to your clients.

Read the full Ultimate Smart Home series:

• Part one: Bedrooms
• Part two: Kitchens

1. Thermostats

Nearly half of a typical utility bill goes towards heating and cooling. Installing a smart thermostat can save about 10% a year, according to the U.S. Department of Energy. This is achieved by adjusting the HVAC system while away from home. They can be set to a schedule, controlled remotely, and react to information via sensors and the weather forecast. Advanced smart thermostats such as Ecobee 4 have additional occupancy and temperature sensors that can be installed through out the home and geofencing capability to know when you’re away. Advanced users can pair their thermostat with connected shades and fans to save even more money. According to American Council for an Energy-Efficient Economy, 11 percent of households have already installed a smart thermostat, making them the most popular smart energy-saving device. Many utility companies even offer rebates of $50 to $100 for installing one.

2. Smart Switches, Sensors, & Bulbs

Leaving lights on when not in use can be a major drain on your energy bill; about 25% of utility costs are spent on lighting. Devices such as smart switches, room sensors, and smart bulbs can help ensure lights aren’t being left on. These have the potential to save 7% to 27% of a home’s overall lighting energy use, according to study by American Council for an Energy-Efficient Economy. However, the amount of energy savings for Wi-Fi connected devices is sometimes offset by the power used to control them. Look for devices that use low-power communication such as Z-Wave, ZigBee, or a proprietary network like Lutron. Smart switches cost around $50 and bulbs range from $15 to $40 each—they’re often sold in a kit, which includes the required hub.

3. Energy Monitoring

By Installing an energy monitoring system such as Sense, homeowners can identify appliances that are quietly adding to the monthly utility bills. The Sense monitor is installed in electrical panel, connected to Wi-Fi, and viewable in real time via a smartphone app. The device automatically detects items in the home in order to identify vampire loads and see how much they’re costing. I use this device, and within a week of installing it, I determined the my computer, TV, and DVR were costing me a lot of money when not in use. I’m now more mindful to turn my computer off when it’s not in use and I’ve have installed a smart power strip to reduce the idle power consumption of our home entertainment systems. Advanced users can take advantage of integrations with Alexa, Google, IFTTT, TP-Link, and Phillips Hue to setup additional energy-saving automation. Sense will help homeowners form better habits, identify problem appliances, and reduce always-on device consumption hat may account for up to 20% of energy use.

4. Smart Plugs

Instead of powering down completely, many modern household electronics enter standby mode and continue to draw power even when not in use. This allows them to continue to communicate with other devices, get updates, and load faster. However, this is a complete waste if you’re not around to use them. Watch out for new smart TVs, gaming systems, DVRs, and computers—often the biggest culprits. Smart plugs, outlets, and power strips enable you to cut the power completely when they’re not in use, and some even allow you to monitor energy usage, such as the Fibaro Wall Plug with Z-Wave Plus

5. Smart Sprinkler System

Have you ever been out walking the dog or driving around town in the rain and noticed sprinkler systems running and thought, “What a waste!”? Rachio can help homeowners save money on water bills by creating custom schedules that automatically adjust for local weather and can be monitored via smartphone. Available integrations allow owners to control water by voice, set up automations, and avoid turning sprinklers on when someone is outside. The optional wireless flow meter helps detect leaks, alerts the user, and can even remove that specific zone while continuing to water the rest of the yard.

Smart-home technology is becoming more widely accepted, but still struggles to overcome up-front costs, perceived complexity, and reliance on internet connectivity. Mitchell Klein, executive director of the Z-Wave Alliance, points out that this technology has had a difficult time overcoming mainstream consumer hurdles. “I think there is a lot of value in helping buyers understand how a smart home can work in everyday situations and benefit their life,” Klein says. “It’s imperative that home buyers understand that a smart home can be easy, and it can also be secure.”

As a real estate professional, you have the opportunity to explain the benefits and associated costs of these systems and offer homeowners help navigating the different options available for their home.

© American Council for an Energy-Efficient Economy