Washington state anti-flipping law (SHB 1843)

General Real Estate Investing

Washington state anti-flipping law (SHB 1843)

Real Estate Investor · Sammamish, WA · Member since 2014 · 14 posts · 4 votes

Question for Washington state flippers. I'm a beginning investor in the Seattle area. Just heard about Washington state's anti flipping law. It seems that only licensed contractors are legally allowed in Washington state to sell a house within 12 months of completing more than $500 worth of improvements.

Is that law still in effect? Under what circumstances is it enforced? Should I look into becoming a licensed contractor so that I can do my own flip deals?

760 views

Investor-friendly agents in Washington, DC

See the agents BiggerPockets members work with in Washington, DC.

Most Popular Reply

J ScottPro Member

Moderator

Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes

Originally posted by @Jay Hinrichs:

And its not a STUPID rule its a great rule.. it protects the industry gives it conformity and protects the buyers of the properties they know that their homes have been rehabbed our built by licensed companies not some Johnny lunch bucket white collar investor who wants to be a flipper and not follow the rules.... :)

If the goal of this law is to protect the consumer, how exactly is the consumer more protected by the owner being a licensed GC versus the owner hiring a licensed GC?

Either way, the buyer is getting a property that was rehabbed by a licensed GC, which sounds like the goal...

What am I missing?

Podcast Guest on Show The Truth About Real Estate Investing in 2024 (What Investors NEED to Know)

See this reply in the discussion

97 Replies

Jump to latestLatest

Sort by

Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
@Bryan Chambers
Yup... but that ties to deed transfers not contract swapping and flipping.
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
0 Reply
Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
11y
I can see the issue and can understand when work requires a permit. But how do they know what work was done and what it cost? Seems like enforcement could be hard to press, new faucets could exceed $500!
I had a house that was simply cleaned and the trash, lawn and tree trimming exceed $500, doubt I'd consider that construction. :)
2 Reply
Howard Edson
OP
Real Estate Investor · Sammamish, WA · Member since 2014 · 14 posts · 4 votes
11y
Originally posted by @Jay Hinrichs:

@Howard Edson
if the cost of licensing is keeping you from flipping then your probably not intending to do much flipping or make very much money at it.. So your right why bother and your strategy of keeping them a year then selling for cap gain is a good one expecially if your just doing a few a year.
@Jay Hinrichs:
Jay - good point. I'll look into the costs on Monday, talk to a few flipper colleagues in WA and will likely pursue the license. It's important to me to operate legally, and seeing that someone with your experience has chosen to do it reinforces for me that it makes sense.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
@Howard Edson
the other issue is if you ever have a claim.. the first thing a good plantiff attorney is going to do is check your license status if your not licensed you going to have issues and you could have issue's if you have insurance policy that should defend you. And in WA if its just a matter of buying a bond and insurance and no test its a no brainer.
The other reason this is a good law it keeps those that can't qualify for a bond or insurance out of the industry and just by its nature it will protect the public as there is a natural weeding out process of those that have no real business being in the contracting business in the first place and should really just be working for a licensed contractor . Lots of bad appels out there that rip off people and walk away as they have nothing to get even if you wanted to sue them...
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
@Bill Gulley
the issue is in Oregon at least and Washington is you need this license even if you never touch the house... If you buy a 1 to 4 unit with the intent to resell it to another for a profit or loss you need a GC or developers license working on the house is part and parcel.. But that's just another issue...
Just like I learned on BP that to resell a home even if you own it in Wisconsin you must hire a realtor or be a realtor. you cannot sell a home you own by your self... when someone first posted that I said no way no how can a state do that well I was firmly corrected.
Then as you state it comes down to enforcement.. and at least in Oregon.. The OCB drives around and makes random GC and insurance checks on job sites including the subs.. they will red tag if a sub or GC cannot prove insurance.
A complaint lodged with the OCB will be follow up... I use to see it at the foreclosure sales were we would have newbies coming in to buy homes you new they were not licensed.
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
@Bill Gulley
to clarify as well you can sell your own home as a FSBO.. you can sell off your rental properties FSBO or with a realtor..
Its the intent if your business or intent is to buy or construct a 1 to 4 unit never live in it or rent it and resell it you need the license's as explained above its pretty simple really.
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
@Bill Gulley
correction 1 to any amount of units ... only land would be exempt from the licensing issues. And constructed or existing structure. I get caught up in my NMLS MLO 1 to 4 all the time... and repeat it by habit.
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
0 Reply
Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
11y
I understand the issue and the purpose and I agree with you.
However, are you now saying that if I moved up there, bought a house, moved in, then 6 months later I had some issue or decided not to live there that I couldn't sell my house at all or for a higher price? I'd say "they" would have a problem with that.
If that's the case, I think the state will have some issues with federal laws, Constitutional issues and rights of property owners.
No, if I'm in the business of buying and selling, that can be a different matter.
I am wondering a bit about interstate/intrastate commerce, I suspect there are exceptions. I doubt that First State Bank can't have a hole in a roof repaired and sell a house within a year. :)
0 Reply
Chris Martin
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
11y
Originally posted by @Bryan Chambers:

I wonder why it`s called the " Anti Flipping Law" in the first place........Hmmm ?
It isn't. "Title: An act relating to the regulation of construction contractors."
http://apps.leg.wa.gov/documents/billdocs/2007-08/Pdf/Bill%20Reports/House/1843-S.HBR.pdf
Exemptions
The activities and persons that are exempt from the registration requirement are modified. They include:
the sale of finished products, materials, or merchandise that are not fabricated into and do not become a part of a structure under the common law of fixtures;
an owner who contracts with a registered contractor, but not if the owner performs the activities of a contractor for the purpose of leasing or selling improved property owned for less than 12 months;
any person working on his or her own property or residence, but not if the person performs the activities of a contractor for the purpose of selling, demolishing, or leasing the property; and
an owner who performs maintenance work on his or her own properties, or who uses his or her own employees to do such work.

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

see Chris's citations above... Its intent.. just like ordinary income and cap gains.

Technically your suppose to own a property 12 months to get cap gain treatment.

But if you have a job transfer or health issues that force you to sell early you can make the case that it was not your INTENT to flip there fore you only owe cap gains..

Its intent.

Podcast Guest on Show #222

JLH Capital Partners51 Review

Website View Page

Home Stager · Rathdrum, ID · Member since 2014 · 33 posts · 13 votes

None of you know unless you have had experience flipping in Washington..........now let`s talk about state excise taxes coming And Going...........it`s profit destruction.

Real Estate Investor · Grand Rapids, MI · Member since 2014 · 2 posts · 1 vote

since when do we need government telling people when they can sell their possessions? It interupts the basic way the economy works. I would fight that law.

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

@Bryan Chambers

Sellers pay the excise tax... I guess if your a wholesaler and trying to buy far under market you would offer to pay the seller 's Excise tax so your giving them a net number but your going to figure that in just like you would any other costs.

But the state law is JUST the seller pays the excise tax... not both. But you don't have state income tax either.. And if your one of those that lives in or near the Oregon Border you simply drive over to Oregon and all your shopping and pay no SALES tax... With the exception of a car airplane or boat you can by any other items in Oregon and not pay tax.

when I was doing some work in Vancouver we could even walk into home depot and show our Oregon DL and they would waive the sales tax... Tried that in CA did not work !!

Podcast Guest on Show #222

JLH Capital Partners51 Review

Website View Page

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

@Bryan Chambers

And in Washington you cannot take title subject to back tax's to change ownership you must bring tax's current

Podcast Guest on Show #222

JLH Capital Partners51 Review

Website View Page

Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes

Originally posted by @Jay Hinrichs:

see Chris's citations above... Its intent.. just like ordinary income and cap gains.

Technically your suppose to own a property 12 months to get cap gain treatment.

But if you have a job transfer or health issues that force you to sell early you can make the case that it was not your INTENT to flip there fore you only owe cap gains..

Its intent.

I'll buy that! :)

Real Estate Consultant · Brookfield, WI · Member since 2014 · 873 posts · 350 votes

Originally posted by @Jay Hinrichs:

the issue is in Oregon at least and Washington is you need this license even if you never touch the house... If you buy a 1 to 4 unit with the intent to resell it to another for a profit or loss you need a GC or developers license working on the house is part and parcel.. But that's just another issue...

Just like I learned on BP that to resell a home even if you own it in Wisconsin you must hire a realtor or be a realtor. you cannot sell a home you own by your self... when someone first posted that I said no way no how can a state do that well I was firmly corrected.

Then as you state it comes down to enforcement.. and at least in Oregon.. The OCB drives around and makes random GC and insurance checks on job sites including the subs.. they will red tag if a sub or GC cannot prove insurance.

A complaint lodged with the OCB will be follow up... I use to see it at the foreclosure sales were we would have newbies coming in to buy homes you new they were not licensed.

In Wisconsin you can sale or exchange any real estate without a license but there is a limit on the amount of times you are able to without a license ; five sales or exchanges within a years or 10 sales or exchanges within 5 years. See Wis stats; chapter 452.01 (2) (b). I provided a link below.

http://docs.legis.wisconsin.gov/statutes/statutes/452.pdf

Residential Real Estate Agent · Tampa, FL · Member since 2014 · 177 posts · 122 votes

Originally posted by @Jay Hinrichs:

has nothing to do with the state wanting a bigger piece of the Pie.. the laws are there to protect sub contractors with comp claims and lien rights.

An LLC can own the asset as long as one of the managing members is a developer ( Oregon rule) or GC then all is good...

Investor that are doing this one the side with no licenses are doing it illegally, but like I said it happens every day all the time... But does not make it right ,, and those of us that follow the laws and get licensed and pay our insurance and Bonds while the flipper next door skates the rules well that's not really well received in our market.. So you can imagine how many get turned in my GC and Developers if they get a wild hare.

And its not a STUPID rule its a great rule.. it protects the industry gives it conformity and protects the buyers of the properties they know that their homes have been rehabbed our built by licensed companies not some Johnny lunch bucket white collar investor who wants to be a flipper and not follow the rules.... :)

quite frankly, it sounds like an incredibly STUPID rule. How bad did the market there get hurt in the real estate crisis? I get it if you want to make sure that all work is done properly with permits etc. But to say that ONLY licenseed contractors can flip property sounds downright ridiculous to me. I'm trying to understand how this helps. What ever happened to Caveat Emptor, let the buyer beware? your going to have a bunch of people get licensed as contractors when they really don't know jack about building things. Seems crazy to me. I've seen plenty of licensed contractors do ****** work and i've seen plenty of unlicensed or homeowners do great work. Onus is on the buyer to inspect the property that they are buying.

Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes

Why am I not surprised by this law? I should be. I want to be. No normal state would even consider something like this. It is a full-time job keeping up with what the bored bureaucrats in Olympia come up with. Don't forget the many other wonderful landlord-tenant laws in my state that appear out of nowhere in the name of consumer protection. Thank you @Howard Edson for posting this thread and showing the world a sliver of things that go on around here!

Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes

Let's see how much hate mail I get.....speaking of protecting the public....actually, I think investors should have some type of license and I wouldn't doubt it happens. No one buys more than 3 houses a year in the same state or sells them, unless an estate is liquidated.....I can see a few exceptions.

Similar to an RE agent's license, test required, continued education like every 5 years, no annual fees or gotcha stuff like Realtors, but it would certainly add structure, ethics, RE law and it might put a few gurus out of business, but it would also add RE instructors.

Okay, go ahead, bash the idea. LOL :)

Insurance Agent · AZ · Member since 2013 · 306 posts · 161 votes

@Howard Edson I sent you a PM. I'm a Commercial Insurance Broker in Washington State, and would be happy to have a conversation with you around your needs. There are variables and nuances to the insurance piece; as it's not really a "one size fits all proposition."

Regardless if you decided to work with me or not, I'd be happy to have a conversation with you and answer questions you may have.

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

thank you for clarifying that I new there was some law about it.. In our state you can sell unlimited amount of properties you own without a license.

Podcast Guest on Show #222

JLH Capital Partners51 Review

Website View Page

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

market here did not get hammered near as bad as Florida some pockets and real high end took a beating but the median only feel 20% or so and has bounced right back

Its a good rule because it forces those in the business to have a bond.. and you know how many folks get ripped off by contractors in this case you could move against the bond if you proved your case. It forces then to have GL insurance again gives the public come insurance to go after instead of Johnny lunch bucket contractor and or newbie flipper who has no assets. OR asset protected paranoid investor that makes it hard to get to assets.

Podcast Guest on Show #222

JLH Capital Partners51 Review

Website View Page

Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes

Regarding "But to say that ONLY licenseed contractors can flip property sounds downright ridiculous to me." ?? That's not what is in the text of the bill identified by this topic. The bill has to do with getting bonded and registering if you are doing contractor work. If you are a flipper, then register. A surety bond payment, from what I found in google searches, is 2%-5% of the bond, so a few hundred dollars. It doesn't sound unreasonable to be bonded and insured if you do contractor work. My 2 bitcents.

J ScottPro Member

Moderator

Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes

Originally posted by @Michael Henry:

In Wisconsin you can sale or exchange any real estate without a license but there is a limit on the amount of times you are able to without a license ; five sales or exchanges within a years or 10 sales or exchanges within 5 years. See Wis stats; chapter 452.01 (2) (b). I provided a link below.

http://docs.legis.wisconsin.gov/statutes/statutes/...

The statute is vague enough that there is dispute about whether the owner of the property must be licensed to sell more than 5 in a year, or whether the owner must use a licensed broker to sell more than 5 in a year.

When I was flipping outside of Milwaukee, I spoke with several RE attorneys about this topic, and the consensus was mixed. Most interestingly, I spoke with one of the biggest RE attorneys in the city, and he was certain that the reading of the statute indicated that the owner of the properties must hold a license; then I called the RE Commission hotline and was told just the opposite by another guy. Turns out the RE Commission hotline guy was the son of the big RE attorney.

So, clearly, it's an open question about whether investors need to be licensed or whether they just need to use a broker to sell...

Podcast Guest on Show The Truth About Real Estate Investing in 2024 (What Investors NEED to Know)

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

its about 4k to get set up in Oregon... At least at the limits of GL that I bought that are probably much higher than the others may do.

But it sure shoots the Guru idea that you can just jump into the Oregon market and start flipping houses with no money out of pocket LOL....

Podcast Guest on Show #222

JLH Capital Partners51 Review

Website View Page

Join the conversationCreate a free account to reply, vote on answers and follow this thread.

Log In Join for Free