There is a new bill in California that will affect home flippers and buyers.  The new law comes into effect on July 1, 2024 (Details on AB 968).  AB 968 was created to protect buyers from purchasing homes with low-quality renovations. Many of my clients have labeled these lightning-quick and poorly done renovations as “lipstick on a pig”.  This can lead to expensive repairs, permitting issues, legal issues, and ultimately buyer’s remorse. In the past home flippers had very little in the way of what they needed to disclose to buyers. After AB 968, the amount of disclosures required by home flippers has been beefed up dramatically. AB 968 applies to the sale of 1-4 unit residential properties that have been purchased and sold within an 18-month period.

Here are the key points regarding this new bill.

• Any structural modifications, room additions, other alterations, or repairs made to the property must be disclosed to potential buyers. Many flippers open up walls for an open-concept floorplan. This all must be disclosed now.
• If any repair exceeds $500, the contractor’s name and contact information must be provided to the buyers.  Many flippers use general labor instead of licensed skilled subcontractors. This is especially concerning with structural, electrical, and plumbing work.
• Copies of permits for any of the work completed must be disclosed to the buyer. If permits do not exist the seller must help the buyer with the necessary information for the permit process. 

Let’s talk about the Pros and Cons of buying a recently remodeled flipped home.

Pros:

• Updated Features: Flipped houses often come with modern upgrades and amenities. This could include new appliances, flooring, fixtures, and even smart home technology, making the house more comfortable and appealing.
• Move-In Ready: Since the house has been renovated, it’s typically ready for immediate occupancy. You won’t have to deal with the inconvenience of renovations or repairs before moving in.
• Aesthetics: Flippers usually focus on improving the aesthetic appeal of the property, which can make it visually attractive and potentially increase its market value.
• Time-Saving: Buying a flipped house saves time that you would otherwise spend on renovations. It can be particularly advantageous if you’re relocating or have a tight timeline.
• Potential for Higher Resale Value: If the flip was done well and the market appreciates, you may be able to sell the house at a higher price in the future, potentially realizing a profit.

Cons:

• Quality of Work: Not all flippers are equal in terms of skill and dedication to quality. Some may cut corners or use cheaper materials to maximize profit, which could lead to issues down the road.
• Hidden Problems: Despite cosmetic improvements, there may be underlying issues that were not addressed during the renovation. These could include problems with plumbing, electrical wiring, or structural issues.
• Overpricing: Flipped houses may be priced higher than their actual value due to the cost of renovations and the flipper’s desired profit margin. It’s essential to research comparable properties to ensure you’re paying a fair price.
• Limited Customization: Since the house has already been renovated, there may be limited scope for customization according to your personal preferences. You may have to live with the design choices made by the flipper.
• Potential for Flipping Flippers: In a hot market, some flippers may rush through renovations or flip multiple properties simultaneously, which can lead to subpar workmanship or insufficient attention to detail.

In my experience, there are both really good and really bad flippers.  Flipping is an investment business, and the investor/flipper is looking to make a profit.  This isn’t inherently a bad thing as a turn-key high-quality home renovation could be mutually beneficial to both the buyer and the seller. However, I have seen more cases of buyer’s remorse when purchasing a flipped house with expensive repairs needed after the purchase.  I am a Realtor and Appraiser in San Diego, primarily in the Del Cerro, San Carlos, and Allied Gardens market area. These houses were originally constructed in the 50s’,s 60s, and 70s.  We still see many homes that are time capsules of when they were originally constructed and are ripe for a facelift.  However, it is important to do your research on each property before making a purchase.  AB 968 will help keep buyers informed and also weed out shoddy renovations done by flippers with proper disclosures in place.  If you ever need a real estate consultation in San Diego, contact me anytime.