Ensuring Smooth Transactions for Flipped Properties in Monmouth and Ocean County, NJ

Flipping a house refers to buying a home that typically needs upgrading. A flipper renovates properties and then resells them for profit. A flip is typically a quick turnaround from purchase to renovation and reselling at a higher price. Our real estate attorneys have keen foresight about potential problems that typically arise when buying or selling flip properties in New Jersey, and we outline some of the legal complexities and important aspects that must be accounted for when you are on either side of a real estate deal involving a flipped property in this guide. We are ready to assist you in protecting your interests through a solid real estate contract, attorney review process, and more, so do not hesitate to reach out to us today. 

For Buyers of Flip Houses in New Jersey: Due Diligence is Key

When a buyer considers buying a flip house that looks brand new on the surface, they must beware of possible red flags.

Thorough Inspections to Find Hidden Problems:

Flippers may rush renovating a home and take shortcuts. Buyers must do their due diligence before purchasing a flip home to ensure no underlying problems exist. This includes inspecting the plumbing, foundation, electrical, and other structural items, like flooring and roofs.  An electrician can verify that the electricity is working properly, and a plumber can check the materials and condition of pipes and whether roots are growing into them to cause future costly problems. A foundation leak can also be extremely costly.

Verifying Properly Permitted Renovations and Improvements:

In addition, the house renovations must be legal, meaning approved by the local government where permits are necessary. The house must conform to New Jersey building codes so a buyer does not have to face the nightmare of inspections and further renovations to bring it up to code.

Look into Contractors and Workmanship:

As a buyer, also consider the contractor who did the renovations. You can research the contractor’s reputation, but the house will reveal poor workmanship. For example, tile flooring may look uneven, cheap fixtures, doors, and windows that stick or are crooked, and sloppy painting reveal potential problems.

Assert Your Disclosure Rights:

Sellers have a legal obligation to disclose known material defects in the property, such as noncompliance with building codes, structural defects, hazards, and previous repairs. A buyer should ensure they get a written disclosure of all known material defects.

Protecting Your New Investment from Previous Troubles:

Another potential issue for a buyer is a clear title, no selling restrictions, fraud, or other title issues from previous owners. As such, a buyer should consider getting title insurance to protect against any liens or other property title issues. Otherwise, a buyer may be surprised to find someone has a claim to the property.

How Sellers can Protect Themselves from Legal Risks when Selling a Flip Home in NJ

The seller has significant legal obligations to buyers, the first of which is accurate disclosure of work performed on the property or any known defects. The risk of inaccurate disclosure or non-disclosure is a lawsuit for fraud. The buyer can sue for damages incurred repairing the property or rescind the contract.  The purchase agreement may include the remedies for defective or missing disclosures.

The seller can include clear protections in the contract, such as warranties that the property condition is as represented in the agreement, including any defects. In this way, the seller can control what they are liable for by spelling out in detail the condition and warranties regarding good title and other representations, so the buyer cannot later claim they were not aware of the property condition. The burden shifts to the buyer to do their due diligence.

In the event of any later disagreements, the seller should keep careful documentation of all work done on the property, including receipts for materials, contractor estimates and invoices, permits, and other records showing renovation and service to the property.  Another way to prevent future liability is to ensure that all marketing is truthful and accurate. A buyer may claim that they were misled by exaggerated or untruthful fliers or other marketing materials that represented the condition or value of the property before or after renovation. 

Hidden Defects, Failed Disclosures, and Your Legal Remedies When Buying a Fix and Flip Property in New Jersey

As a buyer, you may have to sue the seller if you discover significant defects after your purchase. The seller is liable for any known defects they did not disclose. You can demand the repair costs to fix any defects, or you can rescind the contract and get your money back. The challenge is proving the seller knew or should have known of the defects. However, the purchase agreement is the final word about who is responsible for defects discoverable after the sale.  The purchase agreement will include a property disclosure provision. A seller who breaches the contract by failing to disclose known property defects is liable for damages, just as they are liable for any provisions they fail to comply with, such as failing to complete agreed-to repairs, deliver good title to the property, or comply with applicable laws.  Intentional misrepresentations about the property’s condition can get the seller in deep trouble. They face a lawsuit for fraud and misrepresentation, which may include punitive damages in addition to consequential damages for the fraud and misrepresentation. A buyer may also have remedies under state and federal consumer protection laws.

Bronzino Law Firm: Your Legal Advocates in Successful Flip House Transactions

The purchase agreement and New Jersey law determine the buyer’s and seller’s obligations, rights, and remedies. As such, it is advisable to have an experienced real estate attorney who can carefully review the agreement before either party signs it. At Bronzino Law Firm, our real estate lawyers are highly trained and experienced in real estate law involving real estate sales and purchases. Our knowledge, specifically of real estate transactions involving flip houses, can protect you as either party from making mistakes and alerting you to potential pitfalls and liabilities.  Contact us today at (732) 812-3102 to discuss how we can help you ensure your flip property transaction goes smoothly with guidance and representation from our seasoned legal team. We serve communities throughout Monmouth and Ocean County, such as Toms River, Asbury Park, Red Bank, Neptune, Lakewood, Manasquan, and Brick. Ask for a free consultation today.