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What do you need to disclose when flipping a property?

On Behalf of | Nov 17, 2022 | Real Estate Law

Flipping a house can be a very lucrative venture when done right. You buy a distressed property in mediocre condition. You perform as much of the repair and modernization work yourself as you can to keep your costs low, and then eventually you list the property. You ask a fair price from someone who will live there now that the home looks much nicer than it did when you made your initial purchase.

When done well, flipping homes can be a good source of revenue and can benefit the community. You take properties that were possibly hazardous or at least an aesthetic eyesore and turn them into one of the nicest homes in the neighborhood. Your efforts can spur investments by other homeowners and really change how people view properties in the area.

Of course, older homes always have a laundry list of issues. How much will you need to disclose to the buyers of the property you want to flip?

Texas state law has strict disclosure standards

As a seller, you have an obligation to make thorough disclosures to the buyer making an offer. An understanding of the property’s condition will influence how much they feel they should pay for the property. Typically, state law requires that you disclose in writing any known defects with any of the major systems in the home, from the foundation to the wiring.

You may also want to make a point of letting the buyers know about every improvement and upgrade you have made. While that may mean providing a laundry list of projects, it helps them see how long it will be before they have to complete those projects themselves. Yes, a new roof won’t last forever, but it may mean that they have at least 20 years before they have to think about replacing it. Honesty about the repairs and improvements you have made might even drive up the selling price.

The only scenario in which you don’t have to provide thorough written explanations of all the defects in the property is when it is not a single-family home. Multi-unit properties are not subject to the same disclosure requirements, which can make things a little bit easier if you want to sell a quadplex you recently gutted and renovated.

Ensuring that you don’t run afoul of state real estate disclosure laws will make your attempt at flipping a property for profit less risky for you and potentially more profitable as well.