Flipping Illeagle?
I was just speaking with a friend of mine, who was in real estate for years, and she seems to think "flipping" is illegal.. is this true? or a misconception?[ Edited by Birddog1 on Date 10/15/2003 ]
To quote Bill Clinton, it depends on how you define "flipping" and how you define "illegal".
In the language of old timers, flipping is merely buying and selling soon after. That is not illegal, or immoral, or anything else negative. However, you will find that HUD finds a close correlation between "flipping" and Preditatory Real Estate practices, where in this case by "flipping" they mean buying and selling without interim refinancing or permission from the lender, in violation of the terms of the loan. They are working hard to stop that kind of "flipping".
That kind of "flipping" may or may not be illegal as follows. It is a violation of modern loan terms. That in itself is not illegal, but to coach someone to do that and to coach them to hide the fact that they do that may be conspiracy to defraud.
It is discouraged by HUD and the lenders.
The only kind of flipping that is illegal, as i know, is when an appraiser, a mortgage broker and an investor are all in collusion together and they artificially appraise the house high, way above its value, then the broker will hide this from the lender who supplies the funds. After the loan is made, the investor will flip the property and make money, this is illegal.
Of course, realtors are employees (no offense to those reading this) and think inside the box. They hear flipping is illegal in this way, which it is, but no the kind when you are improving the property, rehabbing, and selling for profit, because you can document in a real way how you improved the property, and what comps were, etc.
HUD/FHa/VA loans, regardless, though now require you to hold property for 6 months.
Maybe it would be easier if we all STOP using the term "Flipping" and start using something more professional.
Wholesale, Quick turn or anything else that doesn't give a bad name to this great business.
Best of luck
John (LV)
thanks for the info guys..you've been a HUGE help!!