Real Estate Investing: Is Flipping Illegal
Many have misconceptions about “flipping”, about it being illegal, but “flipping” is a perfectly normal and completely legal activity in the real estate business. However there have been cases where investors do illegal activities to get the result they want while flipping.
Flipping is when you buy a piece of property that you can “flip” or sell to another buyer for a profit. Anytime you buy and sell a house is called flipping. But the term is more associated with wholesaling.
How is that legal? Well, what happens is that you find a good piece of property, put it under contract at a price you agree on, you find a buyer, have the buyer close on the contract at the price you and the buyer agree on. Basically, you are only acting as the middleman who locates a property for a buyer. Now how is that illegal? It’s just like charging for your professional fee for your services. Both the seller and the buyer need you. The seller needs you to find a buyer, and the buyer needs you to locate a piece of property he can purchase.
It is a perfectly normal real estate operation; however, there are investors out there who perform illegal practices while “flipping” properties. When investors try to mislead a buyer about the property’s condition or when the deal is not as it seems on the contract, which is fraud.
Rigging or falsifying documents to get the buyer approved is illegal.
Some overeager investors may try to adjust some facts on the documents to get the unqualified low income buyers loans approved. That is lenders fraud and is illegal. These practices are just some of the fraudulent acts that some investors do just to get that contract closed. Although flipping is entirely legal, some investors do things illegally when they’re flipping.
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