Short of buying new construction, there’s nothing like finding a home that is new looking, updated and in ready to move in condition – a real estate flip home!
A flipped home is one that has been purchased at a low price for the purpose of renovation and resale for profit. Flipping homes for profit have become ever so popular, particularly with the success of HGTV’s “Flip or Flop” television series.
Before you jump for a flip, do your due diligence to make sure you are purchasing a house that is in good/livable shape beyond what the eye can see – inside the walls, attic, basement, foundation, etc.
What must the seller tell me about the home I am buying?
There are currently no required seller disclosures under New Jersey statutes. However, New Jersey courts have provided for an exception under the common law that protects buyers from sellers who do not disclose facts or who hide information about a property.
…Promise that the house is fit to live in
New Jersey law has a rule that a seller implies that the home is fit to live in or habitable under the “implied warranty of habitability.” This holds whether or not a house is sold “as is.”
…Disclose known, latent or material defects
A home seller in New Jersey must tell prospective buyers about known, latent material defects in the property. So if a basement takes in water during heavy rains but there is no sign of it, a seller must disclose this latent defect.
Most importantly are the unseen issues that may affect the health or safety of individuals living in the home. If a seller knows his property has radon ratings above normal levels, he must disclose this.
…Comply with Contract of Sale requirements regarding Representations and Disclosures
The standard form prepared by the listing New Jersey Realtor requires the seller to make express representations about the home and property. Carefully read the Contract of Sale and ask questions to make sure you fully understand what is being promised as to the condition of the home.
15 Tips for Buying a Real Estate Flip
1 Who owns the home? Is it an LLC? If it is an LLC and the LLC terminates after the sale, a buyer may have no recourse. Check the reputation and longevity of the LLC.
2 Confirm the seller used a licensed contractor (s)
3 Request a current and full disclosure statement from the seller and review it carefully.
4 Request a list of all work done to the property, including receipts and warranty information (cable, water heaters, septic, well, grading, plumbing, HVAC, appliances, electrical, gas lines).
5 Confirm all proper permits were obtained for work performed
6 Confirm all work was performed to code has fully passed required inspections.
7 Confirm that the property has received a certificate of occupancy.
8 Arrange for a termite, mold and radon inspection.
9 Arrange for a professional home inspection. Ask your home inspector to help you identify and water damage areas or potential immediate future repairs such as wiring, water heaters etc. Interview and choose your own inspector, make sure they are licensed and insured.
10 Go outside. Fence? Pool? Shed? Garage? What is their condition and what is the seller representing as their condition?
11 Conduct a title search to ensure there are no leans on the home.
12 Confirm that the seller/flipper did not make additions to the home beyond square foot limits or beyond property lines.
13 Ask for references on previous homes the seller has flipped and check references for the integrity of the sellers and that the condition of the homes sold was properly represented and the work was properly executed.
14 Confirm that the property taxes include an assessment based upon the newly improved property.
15 Make sure anything the seller/flipper provides you is signed by them.
If you do identify problems, take the time to fully understand the extent of repair or replacement costs as well as the representations made by the seller in the disclosure statement. With this information, you will be better able to either negotiate for remediation or costs or make an offer that considers your future expenses.
I am happy to help you navigate the purchase of a flipped home. Feel free to call me anytime. (732) 320-2431 or firstname.lastname@example.org.
About the Author: Thomas DeFazio is a full-time Realtor® at Chris Smith Realty in Spring Lake, New Jersey serving Monmouth and Ocean Counties.
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