Flipping houses can be a way to turn liquid capital or good credit into a consistent stream of income. Successfully predicting up-and-coming neighborhoods or locating diamonds in the rough can let you turn a minimal investment into a massive payday.
Often, the home that you intend to flip comes to you in questionable condition. It may have had multiple defects before you took ownership. You may worry about what that means for disclosures to the buyer. What are you required to tell someone purchasing the property after you have made repairs?
You have to acknowledge unaddressed issues and environmental risks
The list of what sellers have to disclose in a real estate transaction is relatively thorough. You have an obligation to tell people about major defects, including latent ones that aren’t immediately obvious upon inspection. Those purchasing residential real estate have the right to know the facts about the property’s condition before they complete the transaction.
Anything from an unevenly settling foundation to a history of termite issues may require disclosure. Additionally, the presence of lead paint, black mold or chemical contaminants due to drug manufacturing may all be something you need to tell a potential buyer unless you invest in remediation. That being said, hiding the repairs that you do won’t necessarily help you get a better return on your efforts.
Disclosures can be appealing to potential buyers
Buyers are often receptive to properties recently rehabbed. Listing all of the improvements, repairs and upgrades you made may entice buyers who don’t want to take on those big projects themselves. Additionally, it will give them an idea about the value that they receive for the price that they pay.
In general, it is almost always better to err on the side of over-disclosing information about a property rather than under-disclosing it. Losing out on one possible offer for the property has fewer long-term financial implications than a buyer being able to make a claim that you misled them during a residential real estate transaction.
Knowing the law and creating documents that optimally protect you can be a smart decision for someone who intends to frequently purchase and sell real estate.
