Is Flipping A Legitimate Real Estate Strategy?
May C
"Flipping" is an ordinary part of the real estate business that some may have misconceptions about regarding its legality, but is actually legal.
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.
There are investors out there who cover up problems and misrepresent the property to be in good condition when it is not just to get that deal closed. That is fraud. As an investor, it is your duty to provide accurate information, both to your buyer and seller, to maintain credibility.
Loans are based on the facts stated in the requirements. If you falsify those requirements to get an unqualified buyer approved, that is illegal.
It is important to know that the loan is based on the facts that are stated on the documents, and misrepresenting them is fraud. There are investors who try to manipulate some of the requirements to get the low income buyers who are unqualified to make loans qualified, just to get that deal closed. Now the problem is that usually the end result would be loan defaults, thus, creating a bad name for other investors who are legally doing the business. That is how some people think flipping is illegal.
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