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In flipping a home, did you disclose areas of concern?

Perhaps you purchased a neglected property that needed a lot of work. You renovated it, made it look presentable again and now you have an interested buyer.

However, some structural problems still remain. Have you disclosed these issues? Keeping material facts about the property from a prospective buyer could cause you considerable legal problems, including a charge of fraud.

How home-flipping works

The practice of flipping a home for profit has actually been around for a very long time. The process is simple: You buy a fixer-upper for a discounted price, engage the services of a contractor to make renovations and find a buyer who is willing to pay fair market value. The buyer enjoys the home and you enjoy the profit you make. Done this way, flipping a house is perfectly legal.

Courting trouble

Problems arise if you do not disclose the “buyer beware” facts about the house. For example, your renovations may have been more cosmetic in nature than anything else. Maybe you did fix some electrical problems, but the roof leaks in a couple of spots, and there are drainage issues that will require the expertise of a good landscaper. In the state of California, real estate forms contain a dedicated section for disclosure information. If you do not set all the facts out properly and you do sell the house, the buyer can sue you for non-disclosure when water problems eventually occur. If by keeping material information from the buyer you inflated the value of the property and hence the price of the house, you could also face a charge of fraud.

An honest mistake

You may have considered the idea of flipping houses for quite some time, but when you found that rundown property and were able get it for a good price, you decided to jump in. A criminal defense attorney accustomed to dealing with cases that relate to real estate investments will tell you that honest mistakes are often made. Remember that you do not have to handle accusations of non-disclosure or fraud alone. 

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