Texas House Flippers: 7 Essential Disclosures

It takes a special kind of investor to flip property. Not everyone can see the potential in a decrepit, run-down, neglected house that may have been standing empty for years or have been deliberately wrecked by the last person who lived in it. Yet day after day, across America, house flippers do just that, giving back livable homes and better neighborhoods.

If you’re an experienced house flipper, you’ll be well aware of the common hazards of your profession. But all sellers, including professional house flippers, need to be aware of the very real problems that incomplete or erroneous disclosures can cause. Simply inserting “as is” into the contract won’t bail you out if you haven’t included the disclosures required by law in your state.
Basically the rules are; facts about a home that can adversely affect its value should be disclosed. Deliberately hiding certain information can even get you sued or convicted of fraud. House flippers, who routinely handle properties in run-down condition, should speak to their local planning and real estate department for guidance.

1. Environmental, Natural and Other Dangers

Does the property face the increased risk of damage from a natural disaster? Has it ever been subject to, or could be subject to, possible environmental contamination?

In Texas, a seller must disclose if the property has been used for the manufacture of methamphetamine. Also under Texas law, sellers are required to disclose the existence of hazardous or toxic waste, asbestos, urea-formaldehyde insulation, radon gas, lead-based paint on the premises.

2. Death in the Home

In Texas, deaths from natural causes, suicides, or accidents unrelated to the property do not have to be disclosed. But if the death is related to the condition of the property or violent crime, it must be disclosed.

Given that a juicy story gets folks talking and some people are superstitious, you should go ahead and disclose everything upfront, even if it’s not legally required. Being a house flipper, you may be concerned about liability or you just don’t want to give the buyer an excuse to back out of the contract. If there’s been a death on the property, your buyer is sure to find out from the neighbors sooner or later.

3. Repairs

What has been repaired and why is an important area of disclosure for house flippers, who usually take on properties that may need considerable work. Texas law requires sellers to disclose any problems, past or present that impact the building’s structural integrity, such as the following:
Earlier structural or roof repairs, any landfill, settling, soil movement or fault lines must be disclosed. Faults or failures in walls or roof, the foundation, floors, sidewalks and fences could also be markers of structural problems.

For your buyer’s peace of mind, you might also want to include electrical or plumbing repairs and any other problems you’d want to know about if you were buying a home.

4. Water Damage

Water damage can’t always be seen and the factors that cause the damage in the first place are often seasonal. Many house flippers only own the property for a short time and may not be aware that come rainy season, the basement floods or parts of the roof leak. The worst elements of water damage –mold that can be a risk to health and cause structural harm – can go unseen. House flippers would be wise to find out how much protection state law offers regarding the disclosure of conditions they have no way of knowing about.

5. Missing Basics

According to Texas law, sellers must disclose if the property comes with the following items; such as central air conditioning, heating, kitchen appliances, exhaust fans, hot water heaters and even rain gutters. The list is long and sellers should contact their local planning and real estate department for direction.

6. Insect Activity

Texas law requires sellers to disclose any active termites or other wood-destroying insects. The same goes for any termite or wood-rot damage in need of repair. Likewise, any earlier termite damage and previous termite treatment must also be disclosed.

7. Miscellaneous Disclosures

These are just some of the possible disclosures house flippers should be aware of. Others, such as Home Owners Association information, zoning, problems with drainage, boundary disputes and pending litigation may be included. Refer to your state planning department or commission of real estate or state realtor’s association.

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