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Flipped homes can be costly, lead to legal action

Buyers are purchasing flipped homes, which are houses that were bought at bargain prices, renovated, and then sold to the buyer for a profit. House flipping is taking place at record levels in Phoenix with 10,000 flipped homes in 2018. This real estate activity has disclosed serious problems which has been costly to purchasers who had to pay to fix problems and could not live in their new homes.

Put simply, many buyers put lipstick on the pig to sell houses with defects. Homes have been sold with mold, asbestos, swimming pools filled with construction rubbish, remodels performed without construction permits, vents that are not piped to the exterior, electric wiring that does not meet code requirements, and attics without insulation.

A thorough and professional inspection can locate these faults. Purchasers should also pay the inspector to do extra work such as scoping through the walls. The typical base inspection costs $500, which can double if the inspector uses tools to look behind walls and thoroughly inspect sewers.

Remedial work should be performed for any defects found during inspection. Signed receipts should be obtained from contractors who fix these problems.

A proper transaction involves qualified and licensed contractors who obtain the required permits, meet residential building code requirements, and undergo inspection. But amateur investors take shortcuts by using unlicensed contractors or contractors who perform shoddy or hasty work. Unskilled investors may not find hidden defects in a house or may try to perform construction that should be undertaken by skilled workers.

There are some legal remedies available to those who find themselves in this situation. A recently enacted law holds inspectors liable for refunding fees paid by homeowners if they are sued for problems that were not found or there was a lack of disclosure of identified problems. Investors and real estate agents selling a home may also be liable for not disclosing known defects to a buyer. Unlicensed contractors can be sued over shoddy work while a homeowner can get financial recovery from a fund governing licensed contractors who go out of business.

An attorney experienced in residential real estate can help assure that the sale of one of these homes is legal, and that the house in question is ready for purchase and habitability. Attorneys may also assist with lawsuits and other legal actions for illegal or unethical sales.

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