Flipping Properties in Washington

Unbeknownst to many in our industry or the general public, the Washington Department of Labor and Industries slipped a bill about contractor registration into this year's legislative session that was approved and signed into law effective July 22nd, 2007.

Oddly enough, in an August 2007 information brief, the Department of Labor and Industries announces the "proposed bill" and invites the public to comment at a planned hearing on the "draft rules" in early November 2007. I can't wait to attend that meeting. I guess better late than never.

In case the reader is wondering what the hubbub on contractor registration is about, here is the language that will have far reaching implications for property owners, investors, communities and Realtors:

Bill 1843, Sec.1. (1) "Contractor" includes any person, firm, corporation or other entity who, or which in the pursuit of an independent business undertakes to...construct, alter, repair, add to, subtract from, improve, develop, move, wreck or demolish a structure, project, development, or improvement attached to real estate or to any part thereof including the installation of carpeting...repair of roofing or siding, performing tree removal services, or cabinet or similar installation... "Contractor" also includes any person...who offer to sell their property without occupying or using the structures, projects, developments, or improvements for more than one year from the date the structure, project, development, or improvement was substantially completed or abandoned.

You can read the entire bill here.

What this means, is that an investor who purchases a run-down property with the goal to fix it up and then sell it (without residing in it for at least one year), will now have to be a licensed contractor with the state of Washington. By the way, according to the bill, the term "Contractor" also includes a person who, to do similar work on his own property , employs members of more than one trade. So an investor who hires tradesmen to remodel a fixer-upper would also need to have a contractor's license. Getting a contractor's license in Washington state is not as simple as getting a driver's license, or a Realtor's license. Among other requirements, an applicant must file for a surety bond, issued by an insurer in the sum of $12,000.

Violation and non-compliance with these new rules will be investigated and fined. The director shall appoint compliance inspectors, who may inspect work sites and issue subpoenas.

I'm outraged that this bill would pass both the House and the Senate unanimously and completely under the radar of the public. What ever happened to due process, transparent regulating and letting stakeholders participate?

Where was the Realtor lobby and  Realtor Political Action Committee?

Property owner's rights are based on the core principles of this country: Ownership and Opportunity. Investors who "flip" properties see an opportunity and take a risk. They are often responsible for the revitalization of neighborhoods. They rehabilitate homes that might otherwise be eyesores, an invitation to vandalism and bring down the values of neighboring homes. If they are willing and skilled enough to do the work it takes to fix up a home, why should they be encumbered by unfair disadvantages that home owners who remodel their own residences don't have to endure? As a consequence of this bill, fewer homes in need of work will be bought, fixed and sold, impacting the real estate market, state excise taxes, property taxes, the community and the business of real estate professionals.

Sandy Nelson
Realtor for Olympia Area Real Estate
www.sandynelsonrealestate.com