Why is flipping property illegal?

Answer 1

As a certified general appraiser in CA, It is absolutely illegal under the following circumstances:

1) You buy the property at market value, make no improvements and resell it for a profit. The case here is this: the homeowner that once had a right to the equity may have unkowingly waived this right based on misinformation - such as a reliance on a faulty appraisal reporting a lower-than-market value. This constitutes fraud and, could be construed as "equity stripping" - especially if your purchase was funded on a faulty appraisal.

2) You buy several properties in a market area and then sell them off, each time for a higher value than the previous sale using the prior sale as a "comparable" - this is white collar crime and the FBI is currently investigating a record number of complaints and "SARs" (suspicious activity reports). This causes a situation that artificially inflates property values for a given neighborhood thereby increasing collateral risk exposure.

3) You find an appraiser willing to "fail to mention" the prior sale or listing and the fact that nothing has been done to the property since the purchase and you turn a tidy profit.

4) You engage "straw buyers" and sell a number of homes back and forth between these buyers within a neighborhood and "pyramid" your profit - once again, the adverse result is artificial property value growth.

It is not illegal if you:

1) buy a fixer at a below market value, invest money to restore the property to marketable condition, and then sell the property after exposing it to the market.

2) buy an REO or Foreclosure at below market value and resell for a profit - in case of Foreclosure - be cautious. A bad appraisal will get you into trouble because the transaction is not "arms length".

Hope this helps...

Answer 2

Well. That depends on what State you live in and the manner in which your using the term.

Flipping a property in my opinion means buying a property fixing it up and selling it. Theres nothing illegal about that. There are plenty of real estate scams though better Google real estate scams and see what you come up with. Have a good one.

Answer 3

Its only illegal if you dont own the property, and the people come home early from vacation.

Answer 4

that is illegitimate everywhere to break construction codes by technique of doing stupid issues to the style of a construction (which comprise demolishing structural load-bearing walls), yet i won't be able to verify why proper renovations might want to be outlawed everywhere? i'm fascinated on your resources. you opt for to get a construction let!!

Answer 5

It's Not ,
It may be related activities like fake appraisals and bogus buyers or fraudulent income statements .

But it's like buying and selling anything ,
As long as the documents are legit and above board ,
Not a problem . . .

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Answer 6

It is not illegal. In the current housing market it is risky if not suicidal, you could lose your butt.

Answer 7

It isn't.

Answer 8

It isn't.