Beware of Mortgage Scams: #3 – The Illegal Flip

The real estate market today is laden with bank-owned properties and foreclosures.  With this brings the opportunity for mortgage scams.  In this 5-part series, we talk about various scams affecting homebuyers today and what to be aware of to be a knowledgeable homebuyer.

#3 –The Illegal Flip

Flipping a home has been something that has occurred for decades.  The practice is defined as a home, often vacant, foreclosed upon, or boise-meridian-bankowned, that is purchased by an investor at a bargain price, fixed up, and then sold for a profit.  Flipping is actually very legal and a great way for investors to make some money in the real estate industry. It is actually a good practice in the housing market as it improves neighborhoods that might be burdened with vacant and foreclosed-upon properties that become run-down while sitting vacant.

However, this practice has become a front for many real estate scams.  In most cases, the scam is quite involved and has many players.  The investor usually purchases the home for a bargain-basement price after the property has been foreclosed-upon. The investor hires someone to fix up the property for the smallest price possible.  He then hires an appraiser that he usually promises a cut to if they will inflate the appraised value of the home.  Then the unsuspecting homebuyer purchases the home for a price he will likely never be able to resell it for and the investor and appraiser make it away with a large profit (and likely no conscious). In most cases, the closing agent is also involved in the scam and gets a cut of the profits as well.

Read about more scams in our ‘Beware of Mortgage Scams’ series.