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Experts say these are the red flags to look out for when buying a flipped house

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It's been nearly two years since Brian Lawrence bought a house in Winnipeg's St. James neighbourhood – two years that have not exactly gone smoothly.

The house Lawrence bought had been flipped, with its lot subdivided with the developer planning to build a new home next door. Since buying the house, Lawrence said some hidden problems have bubbled up to the surface – in some cases quite literally.

He said water has been coming up from underneath the brand new carpeting. Along with that, they've been dealing with frozen pipes – problems that have required costly fixes that their insurance only partially covered.

He said none of these issues were disclosed when they bought the house.

"Looking at it now, I would think that they should have been able to disclose, because if they did all of the renovations they should really know everything with that house," he said.

THERE IS AN OBLIGATION, REAL ESTATE ASSOCIATION SAYS

In a statement to CTV News, the Manitoba Real Estate Association said there is an obligation for disclosure when it comes to flipped houses.

"While a seller that has not resided in a property they are selling may have less knowledge of the property than an individual who has lived in the property for some time, a seller must disclose any material latent defect known to them regardless of how long they have resided in the property," the association said.

The association recommends buyers should work with their salesperson to make sure they have all the information required to make an informed decision.

As for penalties, the association says a lawsuit can be filed and may be successful if the seller failed to disclose a known material latent defect.

LAWYER SAYS IT ALL COMES DOWN TO PRINCIPLE – BUYER BEWARE

However, Winnipeg-based lawyer Jason Bryk, the chair of the Manitoba Bar Association's real property subsection, said it is difficult for a buyer to prove the seller had known of any defects.

He says it all comes down to the principle – buyer beware.

"Really it's a situation where you have to do your own investigations, you have to make sure you know what you're purchasing, and in the event of a defect it makes it very difficult for a person to have recourse against a seller," he said.

He said the standard contract used in sales here in Manitoba has very little in terms of promises of quality, meaning potential buyers need to do their due diligence on the ground.

A good way to do that is getting the house inspected before signing the deed.

WHAT THIS HOME INSPECTOR SAYS ABOUT FLIPPED HOUSES

Dave Sarlo, a home inspector with Nortstar Inspections in Winnipeg, has been in the industry for about 10 years. He said he doesn't often find issues while inspecting flipped homes.

"What these guys are doing is they're improving the quality of the housing stock in the city," he said.

"A lot of people wouldn't necessarily take on a large renovation project of the house, so they wouldn't buy an older house. Well, these guys buy it, they bring it up to the… current functionality, and then they sell it and people get to appreciate something that's refreshed."

He said where he starts to see problems is when, for whatever reason, contractors start to cut corners.

"By getting a home inspector who's practised and looking carefully, you can find more things," he said. "But there will always be things that are buried behind a wall and there's no evidence. There's no way to know those things."

He said that is a risk that's not limited to houses that have been flipped.

"When people are looking at an older house that's been flipped, it's all looking shiny and new inside, you tend to glaze over because it just looks so beautiful," he said. "But you need to get specific. So go wall-by-wall, room-by-room, floor-by-floor – just looking at things."

Lawrence said, while he did have the home inspected when he bought it, he is planning on getting another inspection and hoping they don't find anything major hiding behind the walls.

"I don't want any more surprises," he said. "People that are buying houses, they need to realize all of the information that is available, otherwise maybe there's some red flags." 

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