Real Estate Flipping: Is It Legal?
A lot of people have the false impression of flipping, on whether or not it is legal. There have been some situations where investors, in their eagerness to close on deals, do some tweaking with the activities involved in flipping properties. However, flipping, in itself, is NOT illegal, but is a very legal, profitable business.
What’s “flipping”? Flipping is when an investor buys a piece of property and sells it a short time later for a profit. In real estate, anytime you purchase a piece of property and then sell it, whether soon after or years after, is flipping. However, it is a term more commonly used in wholesaling, which is really wonderful, hassle-free business in real estate where you don’t actually have to buy the property, but you can have control over it and sell it to someone else for a profit.
In wholesaling, when you’ve a property under contract, you’ll only need to find an interested buyer who will then finance the property. You do not have to acquire the home for you to sell it, you can simply put the property under contract, and you’ll have control over it. Once you find a buyer, the buyer can close with you so you’ll have the money to shut on the contract with the seller. It is the buyer who will provide the funding for the property, and you will get your profit from your selling price to the buyer. That is flipping.
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.
Rigging or falsifying documents to get the buyer approved is illegal.
Some investors might do some tweaking on the requirements to get the loans approved, which might be a common practice for the lower income buyers. All loans are based on facts investors provide, and if the some documents are falsified, even when the buyer is not qualified, it would cause loan defaults.
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