Do you sell your flips "as is"?

Question

Since a lot of these were previously foreclosures where the history of the house is unknown, I was wondering what people do? And if you market it as a normal sale, has the buyer ever come back later with a demand, lawsuit, etc.?

J Scott · Answer

I always fill out a Sellers Disclosure with information that is to the best of my knowledge. Since I generally do full remodels, by the time we sell, I generally know exactly what is and isn't working (and have generally fixed anything that is in the "isn't" category)... Also, for my full remodels, I always give the buyer my card at closing and tell them to give me a call if anything that should be working isn't...I don't want dissatisfied customers!

Will Barnard · Answer

In my seller disclosures, I mark that seller has "never" occupied property. I only disclose a problem if I am aware of it and in such cases, repair it before I sell it. As for As-IS, no, I do not have that addendum with retail clients, they have an inspection, then send a request for repairs addendum which Id have the option to repair or decline for each line item they ask for. This is where some negotiating comes into play, much of which I avvoid becuase I purchased my own inspection and fixed all the items that came up to minimize request for repairs on the back end.

Account Closed · Answer

I would think that any potential buyer would be willing to pay closer to retail if there is a full disclosure. If the property is sold as-is there is a tendency to want to discount the price for the unknown.

Theresa Matella · Answer

I have a general sellers addendum that I add with my personal & seller flips. Basically, owner name, address, statements saying that the property was acquired through a foreclosure sale and seller has no knowledge of any defects pertaining to the home; seller has not occupied the home, etc. I WILL NOT sign a sellers disclosure... My sellers addendum to contract is 1 page and has all the basic info that is needed ie. HOA, title company info, escrow, inspections, etc. Also, I don't state on the listing that the home is sold as is, but on my sellers addendum, I have a statement that the home is sold as is, where is, with rights to inspect. ( as is contracts are the normal in my area, so I normally will get these regardless.) Hope this helps.

Theresa Matella · Answer

We do extensive research before purchasing any home at auction and usually the home that we purchase needs only minor repairs, and cosmetic rehab, ie. Painting interior & exterior, landscape, appliances, fixtures, flooring, etc. for a newly renovated home that is move in ready. We normally purchase newer homes, so there aren't any major issues that I personally have come across. In the event that there is anything that materially affects the home(defects of any sort) they are disclosed on my sellers addendum. I have not had any issues with the homes that I have sold, they are always beautiful and move in ready... This is just my opinion & my experience.

J Scott · Answer

Yes, I always fill it out and sign it. I've never had any issues because I've always been completely forthcoming with all information I have... Perhaps I'm just being a bit holier-than-thou, but it bothers me that there are people in the business of rehabbing houses that won't fill out a Seller's Disclosure Statement. As Aaron pointed out above, I'd think that a good rehabber should know at least as much about the condition of the house (and any defects) as a typical homeowner or tenant of the property. Theresa - If you don't know the condition of the home, how do you decide what work to do (and not do) during a rehab?

Theresa Matella · Answer

Hi Mike, as a Realtor, we have some "general disclosures" ie., lead paint, chinese drywall if applicable, affiliated company disclosures, etc. that are automatically added to all of my transactions. On normal sales we have a sellers disclosure that is several pages long that the seller fills out and signs (concerning every detail of the home and if there are any issues). When I sell a flipped home that i have not occupied I do not sign a sellers disclosure, but I do sign a Seller's Addendum to Contract in addition to the previous disclosures that I mentioned. My sellers addendum is to protect me as the investor/seller, I have run into problems when I filled out the sellers disclosure, because I don't know much about the condition of the homes I aquire through foreclosure auctions, and I have no contact with previous owner, I can't disclose there are no issues, if I don't know if there were any. I have on my addendum that is recommended to have the home inspected within the due diligence period. I have checked with attorneys and the sellers disclosure is not required, as long as there is a sellers addendum to note that you have not lived in the property, therefore can not provide an effective disclosure of its condition. When I rehab homes, if there is a visible defect that materially affects the home, I always note in my sellers addendum that is added to the contract. Thanks for the concern.. Do you sign the seller's disclosure? If so, have you run into any issues?

Mike G. · Answer

Theresa, are you sure it's legal in your state to not have any seller disclosures? If the house was built before 1978, isn't there at least a federal disclosure about lead paint you have to provide?

Aaron McGinnis · Answer

I too give a disclosure statement. Heck, most of the time we've torn the house to the studs and sub and messed with every mechanical... I daresay we walk out of the house knowing it better than any regular owner ever will.

Kevin Kaczmarek · Answer

I used to have people sign a Sellers Disclosure that identified that I had no prior knowledge of the condition of the property and it was being sold "As-Is". Of course that didn't apply if I knew something was wrong with the property, it was then disclosed.