New California Legislation Tightens Rules for Property Flipper

You've probably heard the expression "lipstick on a pig." In the realm of house flipping, it refers to superficial improvements that hide underlying issues beneath new paint and Sheetrock.

California's new law, Assembly Bill 968 (AB-968), effective July 1, mandates that sellers who flip one-to-four-unit properties within 18 months of purchase must disclose comprehensive details of all repairs and renovations. This requirement aims to protect buyers from undisclosed property conditions.

However, compliance with AB-968 involves more than just detailed disclosures. Flippers must now meticulously document all repairs costing over $500, provide copies of related permits, or assist buyers in obtaining them if unavailable from official sources. Additionally, they must disclose the names and contact information of all contractors involved.

The impact of this law on residential flippers is significant. While some may continue to handle general contracting themselves, especially for less skilled tasks paid in cash, more regulated work like plumbing and electrical must involve licensed contractors, permits, and inspections. This shift may increase costs and project timelines, challenging the traditional speed-focused approach of flipping.

Non-compliance with AB-968 could lead to fines, lawsuits, or even rescission of the sale if undisclosed work is discovered or promised repairs remain incomplete. As a result, legal consultation prior to listing is increasingly advisable for flippers navigating these new regulations.

This legislative trend in California, including previous proposals like Assembly Bill 1771 aimed at taxing profits from flipping, reflects broader concerns about housing supply and affordability in the state. Despite support for increased housing construction, skepticism remains regarding its impact on housing costs and community dynamics.

In summary, California's tightening regulations underscore the need for thorough disclosure and adherence to legal standards in house flipping, impacting operational costs and market dynamics for investors in the state.

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