| Is home-flipping legal or not? At seminars, I'm often | | | | then you're right, it is illegal. |
| confronted by people who insist "Flipping" is illegal. | | | | But when you "Flip" a house by selling it for retail price |
| What they don't understand is that the part that's | | | | to a retail buyer, who works with a legitimate appraiser |
| "illegal" isn't the transaction, it's the mortgage fraud that | | | | and Mortgage Broker and gets their own financing, |
| some unscrupulous people commit in order to get the | | | | with no "funny stuff," there's nothing even slightly illegal |
| deal funded. | | | | or grey about it. It's simple and easy, with no B.S. |
| When you use an "Option to Purchase" to control a | | | | Some people are just simply SOOO lazy that can't be |
| house and sell it, the end buyer is responsible for their | | | | bothered to buy houses at a discount- instead, they |
| own financing. That means no "fudging" on your part, | | | | falsely jack up the price, bribe an appraiser to confirm |
| and no possibility of fraud. | | | | it, and try to pass them off onto an investor or |
| The Buyer agrees to pay a certain amount, and has a | | | | homebuyer who commits mortgage fraud to get them |
| down payment and credit to match, and knows the | | | | funded. THAT is illegal. |
| deal. They haven't been misled, and you haven't helped | | | | Don't get me wrong, I don't have a whole lot of pity for |
| anyone commit fraud. | | | | the Buyers in those fraudulent transactions. They are |
| The problem comes in when the seller and the Buyer | | | | the ones buying houses without enough common |
| are working together to get an unqualified Buyer a loan | | | | sense to even check the value first! |
| they really shouldn't get. As an example, here's what | | | | Here's something else you should learn from this: |
| some people consider "flipping": | | | | These supposed "victims" (who all volunteer to commit |
| They'll buy a house, or even just contract it, and then | | | | mortgage fraud and know what they are doing, by the |
| turn around and sell it to an unsuspecting homebuyer | | | | way) buy these properties at grossly inflated values |
| or Investor, often from out of town or with no Real | | | | based on appraisals someone else ordered for them. (I |
| estate experience, and usually with no money down or | | | | know, it's hard to imagine they were taken advantage |
| for very little down. | | | | of, huh?) |
| Next, they'll bribe an appraiser to give a fictitious | | | | NEVER believe what someone tells you about a |
| appraisal, much higher than the true Comparable sales. | | | | property without verifying it for yourself. That means |
| They'll work with a mortgage broker who will show | | | | you have to do your Due Diligence- check every |
| the borrower how to submit false documents to the | | | | assumption- about the property BEFORE you buy it, |
| mortgage lender to qualify for a loan they often can't | | | | not after. |
| afford. | | | | While house flipping has gotten a bad reputation in the |
| Then last but not least, they'll forge the closing | | | | last few years due to a few bad apples, it is still a |
| statements from the Title Company to show a down | | | | great way to get into Real Estate Investing if you |
| payment and/or closing costs coming from the | | | | know what to watch out for. Done properly, house |
| borrower, in order to get the bank to fund the deal. | | | | flipping is legal, moral and ethical, and is a great way to |
| Is this what you consider "Flipping"? Bribing appraisers | | | | invest in real estate without tenants, rehabs, or risk. |
| and falsifying loan documents and paperwork? If so, | | | | |