Is Flipping Houses Illegal?
Any new real estate investor will be tempted by the idea of flipping houses. Government student loan consolidation is a quick method with the prospect of large profits for anyone with the time to invest. However, real estate wholesaling is also a place where con artists can set up shop and start flipping houses illegally.
As a new real estate investor it's very important to be aware of the methods used by con artists so you can protect yourself and your clients. Just about anyone can be scammed in real estate flipping too, leaving many to wonder, is flipping house illegal? It's not, but mortgage companies, homeowners, investors, and even the buyers have all been tricked by a con artist with a fraudulent house flip from time to time.
It's to your benefits to learn about these potential scams so you don't inadvertently enter one in your house flipping business. First, let's look at some ways to avoid scams.
Tips to Avoid Flipping Houses Illegally
You can become a successful investor in real estate wholesaling without falling prey to scam artists in any form. You've just got to be aware and make sure to follow these tips:
- Perform due diligence. You'll find most problems with the property this way and create your very own appraisal value.
- Get your own separate mortgage to purchase the property. Don't let anyone get the mortgages for you.
- Don't give out your social security number. Even when working as an investor it's important to be discerning who gets your personal information. However, the bank might need it and you'll probably use it on paperwork with the title company.
Flipping Houses: Illegal Crooked Appraisals
This scam involves hiring a crooked real estate appraiser to appraise the market value of a property at way above or below its real value. This kind of scam is used by homeowners, investors and even crooked mortgage companies to make a higher profit on the sale of a property.
The buyer is the person who loses out here and ends up with a piece of property that they paid way too much for, or the mortgage company who accepts a short sale price that's vastly undervalued for a property.
Don't let anyone convince you that they can 'appraise' the property in your favor for a few extra bucks. It's a great idea and can lead to trouble down the road.
Flipping Houses Illegally with Good Deals
This is a scam that gets a lot of new investors who like to attend free house flipping seminars. Investors may get an invitation from a company that claims to be hosting a free real estate seminar with free food. Quite a bonus right?
Free seminars are very common in real estate and normally a great idea to attend. However, the scammers running this free seminar use it to make flipping houses illegal and will ask you to register with your name, address, phone and social security number. Don't give them your social! It's not needed to register for a free seminar.
Once the con artists have your social security number they look up your credit report and Home refinancing calculator whether or not you make a good potential mark. The higher your credit score the better, because it means you are able to get a very large loan.
Those with better credit scores are approached by members of the 'investment company' with a potential deal on a million dollar house that they claim is worth $2 million dollars.
The investor who enters the deal is coerced into getting a jumbo mortgage loan for a supposedly cheap price of $1.5 million dollars and the 'investment' company will do all the work. They claim that they can negotiate the selling price of this $2 million dollar home to just $1.5 million. Once the deal closes, the investor should be able to sell the home for its full $2 million dollar value and make a nice profit.
However, the con artists won't tell you that the home they've agreed to buy for you is only worth $1 million at full market value and that's what it really sells for. The investment company takes your loan and buys the house for $1 million then gets away with the excess $500,000. The mark is left with a home they paid $500,000 too much for and the scammers only had to buy you lunch.
Simultaneous Closing Scams to Flipping Houses Illegally
There some ways for con artists to make fraudulent sales with a simultaneous closing. You may have already heard that title companies are refusing to take simultaneous closings because of recent real estate scams.
It's better to avoid the use of a simultaneous closing these days when investing in real estate. You'll still be able to make profits without a lot of investment using other real estate wholesaling methods.
Don't worry too much about whether or not your process makes flipping houses illegal, as long as you do your research, follow the letter of the law and avoid these scams. Be aware that these listed scams are just a few of the many that con artists have come up with over the years. If there is a way to do it, scammers will find it and take your money.
Colin Egbert is an experienced Real Estate Investor with plenty of www.shortsaleinvesting.orgshort sale techniques to aid fellow investors in their quest to succeed and make huge profits. He's the author of the ebook "Getting Started with Short Sales" providing the tools needed to start your own real estate investing business. Colin is also the CEO of www.realestateinvestor.comRealestateinvestor.com a website dedicated to helping investors make the most of their business.
