Many residential home buyers including first time home buyers and out of state buyers scour the various real state websites looking for those affordable homes. Here in AZ, these buyers must be careful as some affordable homes are “flips.”
Per Investopedia, flipping is defined as “purchasing an asset with a short holding period with the intent of selling for a quick profit rather than holding on for long-term appreciation.” Often here in Mohave County, many of the “flipped homes” are owned by investors as well as are actual manufactured homes that need everything from cosmetic updating to a complete “gut” job.
Unfortunately, the unsuspecting and unknowledgeable buyers may not know about this AZ statue A.R.S. § 32-1121(A)(6). This statute is for those “flippers” who are not licensed contractors “must disclosure in the purchase contract the names and license number of all contractors performing services at the property."
Additionally, the sellers (think investors who also may be a licensed real estate agents) must adhere to this AZ statue A.R.S. § 32 -1121(A)(14) which states:
“All work performed at the property for the purpose of selling the property, must be performed by licensed contractors if the COST of MATERIALS and LABOR, in an AGGREGATE, totals $1,000.00 or more.”
And this second statue is the “kicker” as hiring a licensed contractor reduces the profitability of that flipped home.
NOTE: Aggregate is defined by Merriam-Webster is “the whole sum or amount: sum total.”
What some investors believe each specific remediation under $1,000 does not apply to this statue. Unfortunately, those investors are in error and the buyers "beware" now applies.
For example, painting the home with labor and paint may be $550. Fixing plumbing issues under the 3 sinks may cost $300. Then installing new flooring including removing the carpeting costs $750. Sum total is $1,550. Yes these are probably quite low estimates.
Connecting with a professional real estate agent who is not the listing agent makes sense. This real estate professional has tools available to determine if the property was flipped. (NOTE: Sometimes the listing agent is the "flipper" or owns a percentage of the "investment firm" that undertook the flip. This ownership must also be disclosed.")
Also in AZ, the home seller or sellers is/are legally obligated to disclose what he or she or they knows about the property in this document “Sellers Property Disclosure Statement” aka SPDS. A review of that document can bring attention to potential repairs. Finally, the buyer's agent can use the local MLS to see when the house was sold including the photos and may some other documents attached to the MLS listing.
Often the repairs are cosmetic, and everything looks so “new” and “refreshed” until the lipstick on the pig wears off. Here is another reason why home inspections are essential along with termite inspections.
Yes, it is sad that potentially some investors may skirt the law to maximize their short term return on investment. For buyers, knowledge is power and professional real estate agents historically have more knowledge than buyers.
Just be careful you are not stuck with a flipped home that ends up looking like “Lipstick on a Pig.”
P.S. Please consider checking out my Facebook business page, The Grit and Gratitude Realtor, that will focus on the Dirt Roads in Mohave County as well as some of the local attractions.
#LetsGetBackToRealConversations #WeDoThingsDifferently
Leanne M Smith, The Grit and Gratitude Agent Who Goes the Extra Mile Because Life Begins Where the Pavement Ends.
Feature Photo Courtesy of Pixabay.com
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