New Fraud On the block
First there were “stated income” applicants in the mid 2000’s that lied about their income to borrow loads of money. Then there were illegal flippers and over-inflated values brought by appraisers. Now there is flopping.
That’s right. Flopping.
The newest form of mortgage fraud allows the perpetrators to receive an average gain of 35% or $55,000 on each deal. Flopping takes place when a homeowner who is upside down on their mortgage sells their home as a short sale (debt forgiven) to a cohort who later turns the house for a profit.
How “Flopping” Works
First the seller applies for a short sale and is given the go ahead by the lender. Then the homeowners do their best to decrease the value of the house in a number of creative ways – pouring urine on the carpets, removing appliances, damaging walls, reporting false repairs and getting false estimates, etc. They then disclose these defaults while marketing the home to legitimate buyers in an effort to dissuade them from buying. After the property has been on the market for an extended period of time, the sellers are able to convince the bank to accept an offer that is much lower than what the property would normally sell for.
Normally the accomplice will already have a buyer on the hook and try to close on the second sale the same day as the first. I guess this would be called a flip-flop (rim-shot).
Banks rely heavily on public reports for cracking down on flopping schemes and they look for trends in the market. Sometimes floppers will repeat the same tactics from property to property and thus raise a red flag to investigators.
If you want to turn a profit legally check out the following articles about investing in real estate:
Also you can Search for Foreclosures and Short Sales here.
There are still deals to be made for those who are patient and decisive and this is the type of market to make your real estate millions.[idx-listings linkid=”275862″ count=”10″]