A real estate flip in its simplest form is a unique tool that real estate investors use in order to make a profit. The investor will buy the property at a discounted price and sell it at market value in quick succession. Oftentimes, the discounted property is a result of foreclosure property that was purchased by the investor, or was the result of the investor’s diligence of finding the right deal at the right time with the right terms. While the term “flipping” sometimes has a negative connotation, if done properly, it can serve as a proper vehicle in which to make a profit.
An ILLEGAL FLIP is a fraud for profit type of scam. One way that the ILLEGAL FLIP is perpetrated is when a scammer buys a property at a deeply discounted price and sells the property at or above the market value by using a false and/or inflated appraisal.
Another way the ILLEGAL FLIP is perpetrated involves selling the quickly flipped property (to an unsuspecting buyer) as being properly rehabbed. The scammer will have shoddy work done to the property and advertise it in a deceptive way in which to lead a potential buyer to believe that the work done was in accordance with general code requirements. By the time the unsuspecting buyer closes on the home, he does not realize that the work done is substandard and the value of the home, as a result of the shoddy work, is far less than what he paid for it (often times tens of thousands less).
ILLEGAL FLIPS not only affect the buyers, but they also serve as huge profit losses to lenders that finance the buyers.
The timing of the ILLEGAL FLIP is also important. With the ILLEGAL FLIP, the flipper will acquire the property below market and quickly resell it to the unsuspecting buyer for a grossly aggravated amount. What the flipper does is he fails to “season the property”. Seasoning the property means that the buyer’s lender will require that the property being sold by the seller, in our case the scammer, be held for at least 90 or more days. With an ILLEGAL FLIP, the scammer will draft phony documents to submit to the lender that shows that the property was held in excess of the 90 days.
Illegal Flips