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Writer's pictureOasis Singleton

New Flipper Rule for California

Updated: Jun 6

Home being renovated

The California real estate landscape is poised for a technical shift with the introduction of a new rule specifically targeting "flippers" of residential properties. This regulation mandates the disclosure of recent repairs and renovations for properties resold within 18 months of acquisition. Set to take effect on July 1, 2024. Let's break down the essentials of this rule and explore how agents can adapt to ensure compliance while maintaining their competitive edge.


Get more information on other new laws in California.


Transaction Coordinator

Understanding the New Flipper Rule: Disclosure Requirements


"Flippers" of residential 1 to 4 properties must disclose recent repairs and renovations to the property in addition to all other existing disclosures. Applies to properties that are resold within 18 months of closing. Standard TDS categories, exemptions and cancellation rights apply.


Applies to transactions if:

  • Residential 1 to 4 units,

  • Seller accepts an offer within 18 months from the date that title to the property was transferred to seller and

  • Renovations or repairs were performed by a contractor with whom the seller entered into a contract.


Requires a seller to disclose to the buyer:

  • Any room additions.

  • Structural modifications.

  • Other alterations.

  • Repairs.

  • A copy of any permits if obtained. (or if the seller contracted with a third party and was not provided with a copy of any permits, the seller may inform the buyer that the permits may be obtained through the third party and provide their contact information).

These disclosures may alternatively be disclosed as a list as given by the contractor to the seller.


Additionally, where the cost of labor and materials was $500 or greater, the seller will disclose

  • The name of each contractor.

  • The contact information of each contractor (as provided to the seller).


TDS application, exemptions and cancellation rights: This disclosure comes within the Transfer Disclosure Statement law. It applies in the same circumstances as the TDS; it has the same exemptions; and it is subject to the same cancellation rights as the TDS and TDS-related disclosures.


Implications for Real Estate Agents

Increased Disclosure Responsibilities: Agents representing flippers will now have to ensure that all necessary disclosures regarding recent renovations and repairs are accurately completed and provided to potential buyers. This includes detailed information about the scope of work, contractors involved, and any permits associated with the renovations.

Impact on Business Operations: For those specializing in flipping properties, this rule introduces an additional layer of due diligence. Ensuring that all renovation-related disclosures are properly documented may require more time and resources, potentially affecting the turnaround time for selling flipped properties.


Best Practice Tips for Compliance and Success

1. Maintain Detailed Records: Encourage your clients to keep comprehensive records of all renovations and repairs, including contracts with contractors, invoices, and permits. Having this information organized and accessible will streamline the disclosure process.

2. Verify Contractor Credentials: When working with flippers, advise them on the importance of hiring reputable contractors with valid licenses. Verifying the credentials and ensuring that all work is properly permitted can mitigate risks and simplify the disclosure of contractor information.

3. Educate Your Clients: Ensure that your clients are aware of the new disclosure requirements and the potential implications for their flipping projects. Educating sellers on the importance of compliance can help avoid legal pitfalls and foster a smoother transaction process.

4. Leverage Professional Networks: Build and maintain relationships with trusted contractors, legal professionals, and other experts who can assist in navigating the complexities of renovations and disclosures. Having a go-to team for consultation can be invaluable for ensuring compliance.

5. Emphasize Transparency: Adopt a policy of transparency with potential buyers by providing thorough and accurate disclosures. This approach not only complies with the new law but can also build trust and confidence among buyers, enhancing your reputation as a reliable agent.


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Looking Ahead

The introduction of the flipper disclosure requirement represents a technical change in the California real estate disclosure process, emphasizing the need for transparency and accountability in property transactions. By understanding the nuances of this new rule and implementing best practices, real estate agents can effectively navigate these changes, ensuring compliance while continuing to thrive in their business endeavors. As the effective date approaches, staying informed and prepared will be key to seamlessly integrating these requirements into your professional practice.

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