New Laws for Flippers in California

[Sammy Lyon]

There are new laws affecting California transactions in 2024, some of which are very relevant to investors and house flippers.

According to the California Association of Realtors, starting July 1, 2024 most 1-4 unit properties that are resold within 18 months (aka flips) must disclose:

- repairs, renovations, room additions and structural modifications that were performed by a contractor with whom the seller entered into a contract

- the name and any contact info for the contractor for any work over $500

- any permits obtained

So you still can be an HGTV star, just make sure you do it by the book. :)

Have any of you flipping in the Los Angeles area been affected by these new disclosures?

It hasn't come up for me on a transaction yet and I'm curious how it's playing out in practice!

For more info, check out the law itself AB968: https://legiscan.com/CA/text/AB968/id/2764362

https://www.car.org/riskmanagement/qa/New-Laws/2024-New-Laws

[Jason Taken]

This isn't really that earth shattering, just kind of annoying.

The title insurer will usually require the scope of work and any lien waivers to issue certain endorsements required by lenders for recently rehabbed/constructed properties.

Permits are all public record anyway - and often double checked by the appraiser.

So - while it is kind of annoying, a lot of this work is already required to complete the transaction anyway.

Just my thoughts.

[Sammy Lyon]

Quote from @Jason Taken:

This isn't really that earth shattering, just kind of annoying.

The title insurer will usually require the scope of work and any lien waivers to issue certain endorsements required by lenders for recently rehabbed/constructed properties.

Permits are all public record anyway - and often double checked by the appraiser.

So - while it is kind of annoying, a lot of this work is already required to complete the transaction anyway.

Just my thoughts.

 In Los Angeles at least I see a lot of flips with no permits. I mean, it's fine I guess, disclosed, but pretty common.

I think what might be different is having to provide the name of the contractor?

Wow, sounds like things are already a lot more regulated where you are in Chicago.

[Andres Murillo]

Quote from @Sammy Lyon:

There are new laws affecting California transactions in 2024, some of which are very relevant to investors and house flippers.

According to the California Association of Realtors, starting July 1, 2024 most 1-4 unit properties that are resold within 18 months (aka flips) must disclose:

- repairs, renovations, room additions and structural modifications that were performed by a contractor with whom the seller entered into a contract

- the name and any contact info for the contractor for any work over $500

- any permits obtained

So you still can be an HGTV star, just make sure you do it by the book. :)

Have any of you flipping in the Los Angeles area been affected by these new disclosures?

It hasn't come up for me on a transaction yet and I'm curious how it's playing out in practice!

For more info, check out the law itself AB968: https://legiscan.com/CA/text/AB968/id/2764362

https://www.car.org/riskmanagement/qa/New-Laws/2024-New-Laws

All of the "owner-builder" folks that would get permits for work and then hire unlicensed, uninsured, discount companies to do the work for as cheap as possible will pivot. 

As a GC and investor - I've seen plenty of crappy work done on flips. Hopefully, this solves it. 

But the cynical side of my brain knows the worst flippers out there will find a workaround for it and continue delivering low-quality flips to unsuspecting buyers. 

[Sammy Lyon]

Quote from @Andres Murillo:

Quote from @Sammy Lyon:

There are new laws affecting California transactions in 2024, some of which are very relevant to investors and house flippers.

According to the California Association of Realtors, starting July 1, 2024 most 1-4 unit properties that are resold within 18 months (aka flips) must disclose:

- repairs, renovations, room additions and structural modifications that were performed by a contractor with whom the seller entered into a contract

- the name and any contact info for the contractor for any work over $500

- any permits obtained

So you still can be an HGTV star, just make sure you do it by the book. :)

Have any of you flipping in the Los Angeles area been affected by these new disclosures?

It hasn't come up for me on a transaction yet and I'm curious how it's playing out in practice!

For more info, check out the law itself AB968: https://legiscan.com/CA/text/AB968/id/2764362

https://www.car.org/riskmanagement/qa/New-Laws/2024-New-Laws

All of the "owner-builder" folks that would get permits for work and then hire unlicensed, uninsured, discount companies to do the work for as cheap as possible will pivot. 

As a GC and investor - I've seen plenty of crappy work done on flips. Hopefully, this solves it. 

But the cynical side of my brain knows the worst flippers out there will find a workaround for it and continue delivering low-quality flips to unsuspecting buyers. 

 Because technically if you do the work yourself, you are not "hiring a contractor" so I wonder if that gets you around it. 

I've seen some super bad flips. Often they are by realtors who are bragging on IG about how many flips they've done this year. I don't see how they get away with it but maybe some buyer's agents are not helping their buyers with due diligence and inspections??

Have you had to fill out the new disclosures on your jobs?

[Andres Murillo]

Quote from @Sammy Lyon:

Quote from @Andres Murillo:

Quote from @Sammy Lyon:

There are new laws affecting California transactions in 2024, some of which are very relevant to investors and house flippers.

According to the California Association of Realtors, starting July 1, 2024 most 1-4 unit properties that are resold within 18 months (aka flips) must disclose:

- repairs, renovations, room additions and structural modifications that were performed by a contractor with whom the seller entered into a contract

- the name and any contact info for the contractor for any work over $500

- any permits obtained

So you still can be an HGTV star, just make sure you do it by the book. :)

Have any of you flipping in the Los Angeles area been affected by these new disclosures?

It hasn't come up for me on a transaction yet and I'm curious how it's playing out in practice!

For more info, check out the law itself AB968: https://legiscan.com/CA/text/AB968/id/2764362

https://www.car.org/riskmanagement/qa/New-Laws/2024-New-Laws

All of the "owner-builder" folks that would get permits for work and then hire unlicensed, uninsured, discount companies to do the work for as cheap as possible will pivot. 

As a GC and investor - I've seen plenty of crappy work done on flips. Hopefully, this solves it. 

But the cynical side of my brain knows the worst flippers out there will find a workaround for it and continue delivering low-quality flips to unsuspecting buyers. 

 Because technically if you do the work yourself, you are not "hiring a contractor" so I wonder if that gets you around it. 

I've seen some super bad flips. Often they are by realtors who are bragging on IG about how many flips they've done this year. I don't see how they get away with it but maybe some buyer's agents are not helping their buyers with due diligence and inspections??

Have you had to fill out the new disclosures on your jobs?

 None yet. Our recent projects weren't "flips" but rather buy-and-holds. 

[Jay Hinrichs]

Quote from @Andres Murillo:

Quote from @Sammy Lyon:

There are new laws affecting California transactions in 2024, some of which are very relevant to investors and house flippers.

According to the California Association of Realtors, starting July 1, 2024 most 1-4 unit properties that are resold within 18 months (aka flips) must disclose:

- repairs, renovations, room additions and structural modifications that were performed by a contractor with whom the seller entered into a contract

- the name and any contact info for the contractor for any work over $500

- any permits obtained

So you still can be an HGTV star, just make sure you do it by the book. :)

Have any of you flipping in the Los Angeles area been affected by these new disclosures?

It hasn't come up for me on a transaction yet and I'm curious how it's playing out in practice!

For more info, check out the law itself AB968: https://legiscan.com/CA/text/AB968/id/2764362

https://www.car.org/riskmanagement/qa/New-Laws/2024-New-Laws

All of the "owner-builder" folks that would get permits for work and then hire unlicensed, uninsured, discount companies to do the work for as cheap as possible will pivot. 

As a GC and investor - I've seen plenty of crappy work done on flips. Hopefully, this solves it. 

But the cynical side of my brain knows the worst flippers out there will find a workaround for it and continue delivering low-quality flips to unsuspecting buyers. 

what will happen is the wholesale price of the homes is going to have to go down.. this will squeeze wholesaler profits and less money for those that sell their homes that are in need of rehab renovation.