Is $55,000 worth 99 years in an orange jump suit?
You know the rewards of flipping real estate but what can you get for ‘flopping’ houses?
CNN Money recently highlighted this new rising trend in mortgage fraud which while a profitable form of real estate investing is also catching increasing heat from investigators.
According to this report homeowners and some investors are systematically lowering the value of homes to get short sales approved for the lowest possible amount, only to turn around and immediately flip them for big profits. This reportedly includes spreading possum urine in homes, falsely reporting meth labs and even purposely stripping homes to devalue them.
Certainly it seems the above may be a little extreme and some may wonder how these homes are different to the thousands which are really in this type of condition but it is important not to get on the FBI’s radar, even if you are doing things the right way.
CoreLogic reports flopping homes delivers an average profit of $55,000 a pop or 34% profit. However, before you start drooling at the dollar signs and head over to party at your underwater neighbor’s house with a meth pipe and a sledgehammer this Saturday night remember that mortgage fraud can land you with more than a life sentence of hard time.
Government agencies haven’t just set up toll free numbers to attract whistleblowers, there are investigators actively looking for fraud and automating alerts to suspicious activity based on players involved in real estate transactions. Plus of course there are enough ‘White Collar’ deal makers who are now working for the Feds to reduce their sentences that you can bet they are already onto the latest schemes.
Of course there is a lot of debate over whether “short sale fraud” should really be considered fraud at all or it is just a way for greedy lenders to recoup money but unfortunately that decision isn’t up to you, it’s up to the judge and the bankroll of the banks and government agencies.
There is nothing wrong with flipping houses and there is plenty of profit to be made doing it the right way. So build on your real estate education to stay out of trouble, disclose what you ought to and you’ll be cashing in for years while those who take short cuts are calling home collect from the pen.