Many have misconceptions about "flipping", about it being illegal, but "flipping" is a perfectly normal and completely legal activity in the real estate business. However there have been cases where investors do illegal activities to get the result they want while flipping.
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.
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.
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.
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.
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.
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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