House flippers should be aware of legal risks

On Behalf of | Sep 14, 2021 | Uncategorized

Especially with so much media and entertainment attention on the most successful home flippers, it is little surprise that many people in the Bay Area try to make money off of this type of business venture.

California’s housing market is ripe for home flippers. With the right business sense and a little bit of luck, a person can make hundreds of thousands off of buying a home, renovating it and then reselling it.

However, as with any business, there are legal risks that home flippers will need to take stock of.

For one, there are important federal laws and other lending laws and regulations that flippers will need to follow. For example, if a sale is going to be backed by insurance from the Federal Housing Administration, there are restrictions on flipping a home.

In all cases, flippers will first of all need to comply with lending laws and will also want to be careful that buyers and others with whom they are dealing follow these laws as well.

Furthermore, many properties in foreclosure or pre-foreclosure have clouds on their title that can greatly reduce the value of the home.

Purchasing title insurance is a good first step, but flippers still need to have some familiarity with property and title law. Moreover, sometimes, a title insurance company may refuse to get involved even though they are obligated to do so.

Those who are in the business of re-selling houses may need legal help

People who are in the business of buying and re-selling homes at a profit may also face other legal problems. For example, during renovation, design or construction disputes may lead to litigation.

House flippers in the area should develop a legal strategy for operating their business and should constantly evaluate their options as legal issues come up.