Good News? The New California Law Making It Harder To Flip Homes On The Cheap
Upon first glance you might think this before and after stepped straight out of early 2000’s HGTV. You’d be wrong. This recent flip tragically occurred in 2023 after an investor bought a gorgeous 1920’s home in Los Angeles and turned it into a cheap gray-wash mess.
The original home had hardwood flooring, solid wood craftsman windows, and an original Batchelder fireplace. The flipper decided to rip out the original hardwood floors and replace them with gray LVP from hell. They decimated the original Batchelder fireplace replacing it with a generic white gas box. And just to add insult to injury, replaced all the unique solid wood doors and windows with the most basic builder grade white vinyl. With all the warmth and character stripped from the original home, this shell of a property probably still sold for hundreds of thousands more for a lesser version of itself.
Flipping the Script
Depending on who you are, the new California flipping law AB-968 taking affect on July 1, 2024 may either be music to your ears or a thorn in your side. For me, it’s a win.
Flipping homes in California is a racket. Real estate investors love to buy up older properties. They often put in a couple of cheap finishes and then sell them for hundreds of thousands more to unsuspecting home buyers. But that’s about to come to an end starting in July.
Below are a couple of the new rules taking affect this summer:
- Investors will be required to use licensed contractors, not handymen.
- If a property is flipped within 18 months of purchase, the seller is required to show all the receipts to the buyer
- Permits have to be obtained and shown to buyers
While this may not stop flippers with poor taste, I hope that home buyers will start to get real value for their money. Not just a new coat of paint and god awful LVP flooring. Disincentivizing predatory flipping is a win in my book. A 3 bedroom single family home in the California bay area can cost a buyer millions depending on the neighborhood. Tack on the added cost of ripping out the cheap finishes or even fixing shoddy work; a home buyer might be looking at hundreds of thousands more in renovation costs.
Why Do I Care?
As an interior designer in California, I work with a lot of new home buyers. Countless times I’ve walked into a newly flipped home and just despaired at the cheap finishes we need to rip out. Many times, my clients will just ask me to work around the “newly” renovated parts of the home and do my best to integrate them. I can totally understand why they wouldn’t want to tear apart something they just spent millions on. And when they do decide to eat the cost and renovate, we always end up finding shoddy work behind the walls.
It’s so wasteful. It always ends up costing my clients more money than their budgets anticipated. It infuriates me to no end. I’d much rather work with a true fixer upper that hasn’t been touched at all than a pig with lipstick.
Desired Outcomes
By requiring flippers to disclose how much they spent on renovating the home, buyers are less likely to be bamboozled by low quality renovations. Most of the time, flippers don’t bother to upgrade vital parts of a home such as roofs, piping, or electrical. Instead, they opt for visual sleight of hand like cheap laminate/LVP flooring, overly bright LED lighting or painting over a water damaged wall.
Relying heavily on staging and photography, the dark secrets of a flipped home often go unnoticed. While some more saavvy buyers can catch these, it often has no bearing on the final purchase price. With homes in such high demand in CA, most buyers resign themselves to shelling out tons of money for something they know isn’t worth it.
I do hate a lot of California’s over regulation (i.e. low flow shower heads, banning of gas stoves etc.). But this is one I can get behind. Low quality flips are evil in my book. They should be stopped at all costs. Bring back value to the California real estate market!
What Really Needs To Change
What really needs to change in the California housing market is a shift in what we perceive as valuable. Prospective home buyers and sellers need to stop overemphasizing superficial fixes that look ok in an open house. Instead buyers should be thinking about the age of the roof, the electrical and HVAC, the plumbing etc. Things that might not be sexy, but will cost you a small fortune to update.
I have no doubt real estate investors will find loopholes around the new law. But at least this is a step in the right direction.
