The dream of every licensee: a buyer who wants to purchase multiple properties, fix and flip them, have you list and sell them, and then do it all over again. While that could ratchet up your income, there are some situations you should consider.

A common scenario:

A buyer identifies 6 houses they would consider buying to fix and flip and plans to close on some of them.

That investor buyer wants to make as much profit as possible in the shortest period of time.

The typical process we go through with most buyers is as follows:

1. Identify the property and make an offer to the seller.
2. The seller agrees, and escrow is opened.
3. As part of the contract between your buyer and the seller, the seller provides the SPDS within the prescribed period of days.
4. During the inspection period, your buyer might inspect the property—either by themselves, with a friend/colleague who has expertise in residential building, or with a licensed inspector.
5. Between the SPDS and the inspection, your buyer decides to move forward and buy the property. They are satisfied with both, close the escrow, and start the process of remodeling the property to sell to a buyer. To do that, they remove counters and countertops, appliances, all the flooring, fixtures, and other parts of the property.
6. It is during that time that previous and possibly current issues are identified, such as termite tubes, mold, water intrusion, dry rot, roof problems, infestations of rats and other critters, and so on.
7. When getting ready to list the property, the seller refuses to provide a SPDS, claiming, "I know nothing about the property…"
   • You agree, list and sell the property, and cross out the SPDS on the offer.

Multiple choice: Who knows more about that property?

1. The previous seller
2. This seller (your client)
3. You
4. You, now the listing agent, and the seller

Both of you read the previous owner's SPDS, reviewed the inspection your investor buyer obtained, and through the remodel process, both of you witnessed the items in #6 above. Since the investor promised the listings to you, that client asked you for guidance on styles, colors, etc. Thus, you were at the property during the process, seeing the bones of the property that the previous seller, who lived there 12 years, never saw.

Do you know what the slab in your house looks like when the current flooring is removed? Can you see behind or underneath your kitchen cabinets? Can you determine if there is any water intrusion under the pan of your shower?

No, typically a current owner does not know about hidden problems unless those problems evidence themselves. But once that house is brought down to the bones, that is when the problems show. Thus, it is up to those people who see that to disclose what they find.

Refusing to complete the SPDS and provide it to the buyer is a failure to disclose material facts, hidden defects, and a gross misrepresentation of the condition of the property, especially when your listing claims "Totally remodeled and repaired property…" or words to that effect.

We are obligated to disclose all material and/or latent defects under:

• R4-28-1101.B (Requirements for Licensees, formerly Commissioner's Rules)
• Arizona Statute §32-2153.A.2, as well as
• The Realtor Code of Ethics, Article 2

We are often faced with a seller who wants you to keep these issues secret. As the keeper of this information, we hold a higher obligation to disclose the potential of a material fact, a latent defect, or any information that a party might use to change the terms or cancel a deal. If you agree to non-disclosure with the seller while you have considerable knowledge of material facts or latent defects, that will possibly put you and your broker in front of a judge and jury.

*Learn about the SPDS and other disclosure obligations in Desert Sage Seminars Disclosure license renewal classes.