Real Estate May C. on 05 Apr 2008
Is Flipping a Legitimate Real Estate Strategy?
“Flipping” is an ordinary part of the real estate business that some may have misconceptions about regarding its legality, but is actually legal.
What is “flipping”? Flipping is when an investor buys a piece of property and sells it a short time later for a profit. In real estate, anytime you buy a piece of property and then sell it, whether soon after or years after, is flipping. However, it is a term more commonly used in wholesaling, which is really wonderful, hassle-free business in real estate where you don’t actually have to buy the property, but you can have control over it and sell it to someone else for a profit.
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.
Although flipping is legal, there are some investors who go about flipping fraudulently, by not properly representing the property to the buyer and not disclosing correct information to the buyer about the property’s true condition, just to get that contract closed. That is not legal. It is the investor’s duty to protect the seller’s and the buyer’s interest, if you want to remain in good standing within the business community.
Falsifying documents that are required to get the buyer approved is also fraudulent act.
Some investors might do some tweaking on the requirements to get the loans approved, which might be a common practice for the lower income buyers. All loans are based on facts investors provide, and if the some documents are falsified, even when the buyer is not qualified, it would cause loan defaults.