There are three ways of looking at the real estate practice of flipping properties. One is a legitimate business opportunity, wherein an investor purchases a property, renovates it or makes some construction changes, and flips it for a quick profit. This is perfectly legal and an accepted practice. The second and third methods are scams wherein the scammer buys a property, gets a fraudulent appraisal done to increase the value on paper and then flips it in order to pocket a lot more than the actual value of the property. Get a legal representative and make note of the following points to prevent your being victimized by this kind of mortgage fraud or to learn how to legally flip a property.
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Two simple steps to avoid falling for a flipping scam are to inspect the property thoroughly and then get an independent appraisal done. Mortgage lenders who do not get their own appraisals done may be targeted for mortgage fraud by these scammers. They buy a property, get a boosted appraisal and then sell the property to their own shell company, which will take out the mortgage. The scammer pockets the difference and the lender is stuck with an underwater property in default.
This can also be done with an unsuspecting buyer who overpays for the property based on the fraudulent appraisal. Victimized buyers can file a lawsuit and charge fraud under Real Estate Settlement Procedures Act (RESPA) violation.
Do you or does someone you know need legal information regarding flipping properties? Our real estate lawyers are here to help. Contact a real estate attorney in your area today for more information.
Did you know?
RESPA prohibits kickbacks and fees charged in collusion during a real estate transaction.
Flipping properties involves a lot of fees for multiple transactions, and the scammers often violate RESPA regulations that forbid collusion between parties to extract fees from buyers without disclosing the collusion.