Is it easy to execute property flipping correctly?

There are different ways to do property flipping transactions, and not all are legal.

1. The real estate professionals use cash when buying for instant equity, and sell wholesale under market value for a quick return. Usually between banks and real estate brokers. In my opinion this is the only flipping transaction worth doing.

2. The individuals with carpenter skills do improvements at distressed properties and sell at the market value relatively quickly.

3. In between is the illegal flipping.

The whole bunch is here.

The correct flipping is a wholesale transaction.

• Both the buyer and the wholesaler/seller openly enter the transaction with the intention of making a profit;

• The buyer is a relatively sophisticated, experienced renovator or landlord;

• The property is purchased at a very low price and sold at a significantly below-retail price;

• The seller does no repairs to the property at all. The buyer determines from his/her experience what needs to be done and estimates the cost; The buyer completes his own appraisal based on his experience;

• There is no lender, and thus no bank fraud. The property is quickly flipped at a significantly below-retail price;

A common property flipping example.

• It is done with the intent of providing a qualified buyer with a top-quality home;

• The targeted buyer is typically middle-income, so the properties chosen by quick flippers are in the middle-income value/locations;

• The property is purchased at a very low price and sold at a retail or higher-than-retail price;

• The seller does all the renovations necessary to bring the house into prime condition for the area;

• The seller prices the house correctly in order to attract a qualified buyer mostly with improvements done recently. Any appraiser may confirm the value if necessary;

• The seller pre-qualifies all potential buyers to assure that one will be able to purchase the property quickly. Thus assuring himself the return of his investment.

What is illegal about property flipping?

• It is done with the intent to defraud the buyer;

• The buyer is an unsophisticated, low-income homeowner;

• The property is purchased at a very low price and sold at a retail or higher-than-retail price;

• The seller does minimal repairs to the property, usually covering up any major defects without fixing them;

• The seller works with a particular appraiser to get a higher-than-market appraisal;

• The seller works with a particular mortgage broker to falsify information on the buyers application, making them seem more qualified then they are.

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