The Fix and Flip

John Mijac, Managing Broker
Long Realty Foothills Office

Fix and flip: it sounds so simple, and desirable! Who wouldn’t want to be Tarek and Christina from Flip or Flop, or even the next Property Brothers…TV stardom, $$$ and fun, fun, fun! Right? How hard can it be? Knock down a wall here, slap on some paint there, a few granite countertops, a fancy shower and Boom! You’re in the money, doing a service both for the community and those wonderful first-time home buyers…until the ceiling sags from the missing load bearing wall, the paint flakes off to reveal mold, the new HVAC fails, and the buyers sue.  

But that doesn’t really happen, does it? Well, yes, in my practice I have seen the above and worse, many times. I have also seen excellent flips, but those are not always in the majority. I get the argument though, free enterprise, and as one said to me: “It’s my property and I can do what I want.” I get it, a person’s home is their castle, right?” (Okay, forgive me for the gender-neutral rephrasing…I am fully aware that, as far as pronouns go, we here in Arizona are pretty much antediluvian…in other words, we behave as though it is 10,000 years before the flood, and that would be Noah’s flood.) How is any of this relevant? It might take me a while, but I think I can get you there. 

Let’s start with the phrase “A man’s home is his castle.” That saying goes back a long way—back before the days of William Blackstone, and his idea that ownership is sole and despotic. Blackstone said the proof of ownership lies in the fact that you can destroy the thing if you own it. An idea that led to waste and abuse. This was understandable given the fact that land deeds traced back to the king and since then kings could do as they pleased.  

And, the home–castle phrase goes back to at least 1505. Look at this writing, from a ruling made by the King’s bench. You may not be able to read Ye Olde English, but I bet you can piece out the highlighted words. 

But, is this castle idea a perfect setup for a flipper? I am not so sure. If a home is a castle, does it have its own laws and borders? Are you king or queen of all you survey? Maybe not so much if you plan to sell your fortress. Since, if we abide by this medieval principle, though no one has a right to tell you what to do with it or how to do it, later, having done it and sold it, can the new owners throw down the gauntlet and duel with you in a joust? Egad! 

We here in Arizona pride ourselves on being independent and few are as independent and entrepreneurial as real estate agents…but aren’t we forgetting something? The understanding of ownership has been a bit updated since the 16th century, no? Remember that guy Wesley Newcomb Hohfeld? He said ownership was NOT sole and despotic since it must include the rights of those around us and those who came after us… not just our progeny, but those who own the land and its appurtenances after us. Think: The people we sell it to. 

Hohfeld is the lawyer who came up with the concept that ownership consists of a bundle of rights: the right to quiet enjoyment, the right of possession, the right of exclusion and so forth. But this bundle also described equal and opposite responsibilities. This codified our modern conception of ownership. The idea underscores the notion that we live in a society and have responsibilities to others as well as rights…these rights and responsibilities go hand in hand. But we also live in a state founded on the notion of the handshake as a contract…that is how cowboys did business, a handshake in the spring for the price of the raised cattle in the fall. Sadly, the handshake does not work anymore, but its foundation is in our constitution: good faith and fair dealing. That, plus Hohfeld’s understanding of the rights of others around us, our responsibilities and those who own the land after is the basis for our laws pertaining to flipping—my opinion of course.  

What laws, you say? Well, the one I am thinking about is A.R.S. § 32-1121(A)…the so-called Handyman rule. It is probably the most abused and broken law in real estate, and not just by flippers. If you read further, you might discover you are regularly aiding and abetting crimes. Still, though ignorance may be bliss, it really is no excuse.  

You can find a useful link to the Registrar of Contractor’s annotated pamphlet of the statutes relevant to Contracting (which includes the section on those allowed to do work without a license) at az.gov.  

It might seem ridiculous to get all warped over a little work done by a homeowner…after all many homes in Arizona kind of resemble snails…Porches turned to Arizona rooms, then porches added onto those rooms, those porches turned into Arizona rooms, ad infinitum! Practitioners know almost none of such work was permitted. So, what’s the fuss? Well, it is different if a homeowner does the work for themselves and they live in it for years, they discover what is wrong and fix it…pride of ownership! This is opposed to a remodel done for sale, which amounts to pride of profit. Really the old paradigm not the new. 

So, what are the common illegal misuses? Many, but just beware of these and it is a good start: 

1. If a homeowner has acted as their own contractor and the home is offered for sale (only offered!), prior to a year from completion, that is considered proof positive the intent was to evade the law…. the most common infraction by flippers. 

1. When repairs are done by a handyperson and the grand total is in excess of $1,000 (I know that is not much, but it is the law) this exceeds the limit. This is common because that amount is for the WHOLE job…not just a single repair on the BINSR. The second most common crime. 

1. Not placing the ROC numbers on all advertisements and on the contracts… well this might be number one. 

There are many other infractions, but if we could address these three, we would be considering those who come after us, and not risk our licenses or harm the public. Think about your business, flippers. Good and legal work ensures the safety of the public and will inevitably build a stronger, future customer base. Abandon the old paradigm and go with the new: My home is your future castle, and I’ll build it as if I were living in it.