Continued – What a REALTOR® should know when representing a “flipping” client.
- June 5, 2019
- Kristine Beaver
- Comments Off on Continued – What a REALTOR® should know when representing a “flipping” client.
By: Joseph G. Urtuzuastegui III
For the seller of a flipped property[1], Arizona requires performance to be completed by a licensed contractor whenever the work costs more than $1,000.00 (for anything less, the “handyman exemption” may apply). See A.R.S. § 32-1121. For example, if a property needs new flooring which will cost $1,500.00, a licensed flooring contractor must be used to complete the work. In addition to the licensed contractor requirement, the seller must include a list of “the licensed contractors’ names and license numbers . . . in all sales documents.” See A.R.S. § 32-1121. That means the list of contractors used must be included with the Real Estate Purchase Contract! The failure to use and list licensed contractors may cause the seller to be considered an “unlicensed contractor” and could also result in possible prosecution by the state for both YOU and YOUR CLIENT.
For buyers it is simple, if the seller’s agent fails to disclose the licensed contractors employed to renovate the flipped property, the buyer’s agent needs to ask for the disclosure. As you know from ethics courses, a REALTOR® has the fiduciary duty to act in the best interest of their client (remember C.A.R.L.O.A.D.?) and ensuring the seller complies is also the duty of the buyer’s agent. If the seller fails to produce a contractor list, a red flag should raise for the buyer that the proper work may not have been performed.
Both the buyer’s and seller’s agents have additional fiduciary duties to their clients when a flipped property is involved. Popularity in these homes are continuing to increase throughout the valley, therefore, it is important that REALTORs® understand how to properly represent a client involved with a flipped property.
*The information provided in this article is of a general nature and reflects only the opinion of the author at the time it was drafted. It is not intended as definitive legal advice, does not create an attorney-client relationship, and you should not act upon it without seeking independent legal counsel.