California Just Announced a Major Change to the Way People Buy & Flip Homes — And Here’s How People Feel About It

If you’ve ever watched a home renovation show, you know the basic premise: Buy a fixer-upper, spruce it up, and sell it for a profit. But in California, that process is about to get a lot more regulated. The Golden State just recently enacted a law, the “Flipper Disclosure Law” (or AB-968), that could make flipping houses a much trickier business. Whether you’re a buyer, a seller, or just someone keeping an eye on the market, this new legislation is bound to have ripple effects across the housing industry — and maybe even across the country. Let’s dive into what’s happening and why it matters.

The Flipper Disclosure Law requires home flippers to disclose a lot more information to potential buyers, adding a layer of transparency that many believe has been missing in the fast-paced world of flipping.

Under the new rules, anyone flipping a home must provide detailed disclosures about what work was done on the property, including whether proper permits were obtained. This means if a flipper replaced the plumbing, rewired the house, or even just knocked down a wall, they have to spell it out in clear terms, if that seller has owned the house for less than 18 months. 

They’ll also need to list all the contractors — and contractors will be required to complete most work (sorry, Chip and Joanna hopefuls) — who worked on the project and the nature of the work they performed.

“This bill came about in part because you often have people who flip houses and do it quickly, with materials that may look great but might not be of the best or long-lasting quality. For the buyer, that means things will start falling apart in a short time,” explained David Almaraz, an attorney at Grant Shenon in Sherman Oaks, California. “I think these added disclosures just allow the buyer to know more about what they’re walking into.” 

Why does this matter? For buyers, it means a clearer picture of what they’re getting into. No more wondering if that stylish new kitchen was installed by a licensed contractor or if it’s hiding a few shortcuts underneath. The goal is to protect buyers from unforeseen issues that could turn their dream home into a nightmare.

For the folks on the flipping side, this law is a game changer. Flippers will now need to be much more diligent about the work they do, ensuring everything is up to code and fully documented. This could mean hiring more licensed professionals, obtaining the right permits, and keeping meticulous records of every step in the renovation process.

This added layer of oversight is likely to increase costs for flippers. They might need to budget for more expensive (but necessary) fixes, pay for the proper permits, and potentially deal with longer timelines to ensure all the paperwork is in order. In a business where time is money, these changes could eat into profit margins and make flipping less appealing to some investors.

But it’s not just about costs, analysis of the law shows. The law could also change the types of properties that flippers go after. Instead of snapping up homes that need major overhauls, flippers could start focusing on properties that require only cosmetic updates, which could lead to a shift in the market, with fewer fully renovated homes available and more “lightly refreshed” properties hitting the listings.

For homebuyers, especially in California’s competitive market, this new law could be a breath of fresh air — or at least a sigh of relief. With more stringent disclosure requirements, buyers should feel more confident that they know what they’re getting. Plus, some experts think that the law could also force underqualified flippers out of the market — increasing the quality of flips all around.

Almaraz, however, isn’t convinced the new law will make much of a difference on the buyer’s end during the closing process. “Honestly, I’m not sure it will have that much of a dramatic effect,” he said. “Based on my experience, sellers will likely comply and make the disclosures, and buyers will just ignore them and buy anyway if they like what they see — something like the agreements that everyone just scrolls past on websites.”

“In a perfect world, a seller’s agent goes over it with the buyer in detail, and they make sure everyone understands everything,” Almaraz added. “But in reality, I don’t think that happens, because they know that the more inspections you do, the more poking around, the more walls you open, the more likely the deal is going to die.”

There’s also another flip side (pun intended): The added costs and longer timelines for flippers could result in higher prices for these renovated homes. If flippers need to spend more on renovations and jump through more hoops to sell, they’ll likely pass those costs onto the buyer. So, while you might get more peace of mind with a flipped home in California, you might also get a higher price tag.

California has a reputation for setting trends that the rest of the country follows, from environmental standards to consumer protections to vehicle regulations — the New York Times even says that California laws are “the most widely copied in the nation.” 

But not every state has the same real estate dynamics as California. In places where the market isn’t as intense, where housing stock is less of an issue, or where flipping isn’t as prevalent, there may be less urgency to enact such stringent regulations. Plus, the political climate — and the lobbyists — in each state will play a big role in whether this kind of law gains traction elsewhere.

Are you buying a home or hoping to learn more about the current market? RSVP here for Apartment Therapy's free real estate webinar on Sept. 17, with insights from Egypt Sherrod, HGTV Host & CEO of Indigo Road Realty; Jose Prats, Director of Character Homes at Christie’s International; and Jason Saft, Founder of Staged To Sell Home.