What do I have to disclose as the seller when flipping Indy houses, what defects must be disclosed?

by | Indiana real estate, Indy Anna, Real Estate Investing

When I’m selling a house after making major repairs, what do I need to disclose to the buyer?

As a real estate investor who is flipping houses you will be on both sides of a transaction sometimes as the buyer and other times as the seller.  When you are a seller, especially after making big repairs, you need to know what you have to disclose and this class will help you that.

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Now for today’s class on what to disclose when selling a house after a flip…

What do I have to disclose at resale on a flip?

Did you know that it’s legally required to provide a seller’s disclosure in Indiana for most residential properties for sale?

I say most- because there are actually some exceptions here believe it or not. Properties that have above four units are exempt, as well as when property transfers only in name like from a husband to a wife, or to a husband from a living trust of the wife.

In addition to this- it doesn’t have to be a willing seller/ willing buyer transaction- in cases such as a condemnation, sheriff’s sale, a court ordered transfer, or an appointed trustee of an estate/bankruptcy. Now, for the rest of us fine folks- yes, we have to complete a SD.

The seller’s disclosure.

So, the big deal in making sure everything is on the up and up with the SD is that falsifying information on an SD spans from a misdemeanor all the way to a felony. The punishment can be a monetary fine or a fine in combination with prison time- not ideal stuff and here’s more info on this as well.

https://www.legalmatch.com/law-library/article/criminal-consequences-for-real-estate-fraud.html

We’ll include that link below too-

So, does this mean you have to avoid all properties with any disclosed issues or back out of all deals that have issues show up at inspection? Nope, not at all…

Indy Anna explains;

What a defect is legally
What doesn’t have to be disclosed after a flip
How to make sure you clearly understand an SD

Okay, so I’ve talked to some of the folks here in Indy on our legal team, BigREIA.com/people and, and here’s what they had to say about the legal portion of disclosure.

The idea of a defect in real estate is something that may have a significant, adverse impact on the value of the property- or can be a risk to people. Now, to be clear when you’re working with a flipping property, there are usually a few things that will come up. These might not appear on the SD – I’ll explain why, but they could come up at inspection in due diligence period.

The “don’t know” option.

Okay, so if we just said that you have to disclose all of this, why would it not show up on the mandatory- if not exempt property- SD?  Well, about 80% of the time you’ll find an SD marked “don’t know” in all columns and then the disclaimer stating, “seller has never lived in property”.

Odds are, this is accurate too as these are investment properties. Now, we do have some agents on the up and up that will mark things like ‘hazardous conditions’ because they know it’s legally best to be upfront. This can include things like asbestos siding for example.

Known defects.

The issue comes in when there are truly known defects, and they are not disclosed. So, does this mean that if you’re in the shopping phase of things you should avoid properties with defects completely? – Now, we’ve made other videos on the phases of buying homes here in Indy and how that works with our team- and be sure you check those out after this one. But, the answer is not necessarily.

There may be significant defects- again that will affect the value of the property or even be hazardous, BUT, if they fall within the rehab budget to fix you aren’t in need of disclosing them at the relist – post flip.

Are you sure this is legal?

YES – because the defects needed for the SD are based on the current state of the property, not the previous one.

A few examples of what is NOT needed to be included on the Seller’s Disclosure:

If you’ve taken out all the moldy drywall and it was nowhere else upon inspection then you replaced it, you’re fixing the mold.

If there were foundation issues and you were to fix those as part of the rehab process, again that is not necessary to disclose as it’s not the current state of the property.

Now these examples could go on and on, but the bottom line is this:

The Seller’s Disclosure is to cover the current state of a property.

If you’ve done the correct and appropriate fixes, then the current state has changed and therefore indeed not needed be disclosed.

To make this SUPER clear for everyone I’m going to include a download of a blank IN seller’s disclosure for you to see and this will be available down below as well as our always FREE download.

Get a FREE download of the Indiana Seller’s Disclosure.

So; to be clear if a defect is truly fixable, and within budget to do so; no, at re-list you don’t legally have to disclose it once it’s been fixed. This is because the SD is to disclose the CURRENT state of the property, not all that has ever been in its entire history.

Now to make sure you clearly understand what you’ll be looking at here in Indy on any SD, I’m going to include one for you to see.

If you have any questions on this, reach out and I’ll do my best to help answer them for you.

Remember what you DO have to legally disclose is what you know to be a defect and that was not ever fixed. And I’m going to say this right now clearly before we ever work together -and if you’re a good fit, trust me I hope we do- but I will make sure we are using qualiefd contractors and other professionals for all defect fixes in our flips, not just anyone lol.

Here’s an Indiana Seller’s Disclosure for free in .pdf for, you can download it by clicking HERE.

Okay to to recap we covered;

What a defect is legally
What doesn’t have to be disclosed after a flip
How to make sure you clearly understand an SD

For now, be sure to go to BigREIA.com because…

Creating passive income will…

Make the Universe Smile.

~ Indy Anna
love@bigreia.com
317-969-5619 (Yes, that’s my real number lol so please text me first)

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Make the Universe Smile.

~ Indy Anna
Love (at) BigReia.com
(YES that's my actual Direct Line and I really do answer lol, so please text me first Thx!)

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