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There
are legal issues from start to finish in the process of
flipping a house. A good lawyer is a must. Some states require
a separate attorney represent each party at real-estate
closings some states don't. There are many things that could
need the attention of an attorney like liens, old permits not
inspected, back taxes owed, improper deed filings, what has to
be disclosed when selling, & code violations.
When
you get a lawyer, use a law office that has experienced
attorneys in the real-estate field. You obviously don't want a
lawyer that specializes in divorce researching real-estate at
an hourly rate. Getting someone specialized in real-estate
could save you hundreds. Even if you are just using the legal
services for closing on the buy and the sell of the property,
you will save by using a specialized individual. There is
usually a flat legal fee for closings whether the buy or the
sell. See if you can get a deal if you use the same attorney
for the buy as you will the sell. This could save you money and
help you develop a good relationship with an attorney that you
may need if other things arise. A good attorney will also make
sure that there isn't back taxes or liens involved before you
sit down at the closing table.
Not
only what you do to a property when you rehab is important, but
making sure what you do is legal and code compliant is
important too. If you go and add things to a house and they are
not done to code, you could find a world of hurt when you go to
sell that house and have to redo what you have already done.
Not only do things have to be done to spec with code, many
times they have to be done by licensed professionals in that
locality. Plumbing is a big one, licensed plumbers are required
to do many things. Just because Home Depot sells you the
materials, does not mean it is legal for you to install them.
Check with your local code enforcement officers before you
start something you are unsure of. Some neighborhoods you are
limited to what color you can even paint your house.
Other
code violations may have been in place when you bought the
home. The former owners may have been granted variances to code
that were in effect only while they owned the house. Or there
may have been updates not ever done that were grandfathered in
until the next owner takes possession of the house (you). If
you see an outhouse in the backyard, you might want to consider
a different property or worry if you already own it.
There
are certain things that you have to disclose to buyers when
they buy a house. These things vary by state, county and city,
so do your research, and if in doubt tell the buyer about a
known defect before a home inspector does. In some areas if a
basement has leaked in the last 5 years whether it has been
fixed or not or wther it still does or not, you have to inform
the buyer of this former defect. A good real-estate closing
attorney will know exactly what needs to be disclosed to the
buyer and what is not applicable or outdated seeing as the
repairs that you have done.
Neighborhood
associations are another one that have a tight reign on what
you can and can not do to a property. It usually pertains to
the outside appearances, but sometimes it is hours you can work
due to the noise of power tools. If you are doing this first
flip while you are working another job and plan on working at
the property at night, you better make sure there is no rule
that says you can't. Could be hefty fines or mean quitting your
job or hiring someone to do the work you had planned on doing
yourself.
Property
insurance is a must. If you own real-estate whether it be an
empty lot, home or business, you must have it insured. In some
localities property insurance is required by law. If someone
gets hurt on your property you will be held liable to some
extent, especially if that person does not have health
insurance. Not only against liability, you will probably want
it insured for losses from theft, vandalism, flood, fire etc..
This is your investment, you are going to want it protected.
You should be able to get it through whoever you have your
vehicle or home owners insurance coverage through.
In
addition to property insurance, be careful on who you pay to do
what. If it is a company or contractor, ask them for a copy of
their workman's comp insurance. They should be able to provide
you an accord. An accord is just a document that shows their
insurance coverage limitations and dates in effect for. If you
are paying someone to do work make sure they are covered by
their own worker's comp coverage. Paying someone as an
employee without having that coverage in some states is a
criminal act and has possible jail time if caught.
No
matter what issues arise, be prepared for them. Most can be
avoided by doing diligent research before acquiring the home.
The rest is going to line the pockets of a couple attorneys
litigating over it, at most likely your expense.
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