Tag Archives: property flipping

Property Flipping

Property flipping is a large problem in the real estate market. This happens when a person buys a home and puts it right back on the market anywhere from twice to ten times what he or she paid for it doing little to no rehabilitation on the home.  An article on nhi.org by Ada Focer stated that

“…the truth is that behind the paperwork of property flips are a lot of lies orchestrated to create an illusion that the properties are worth more than they are, or the buyers are financially stronger than they are, or both. When markets cannot differentiate between illusions of value and the real thing, everyone gets hurt – not just the buyer, but the whole neighborhood.”

The threat of flipping is very real and is all over the country. On February 18th, 2011, Robert W. Dufresne of Golden Valley, MN pleaded guilty to swindling investors out of more than five million dollars in a flipping scheme that spread out over multiple states. He faces up to 20 years in prison for the mail fraud charge.  The entire article can be found here:

http://tcbmag.blogs.com/daily_developments/2011/02/mn-man-pleads-guilty-in-5m-house-flipping-scheme.html

and here, along with various other MN scammers that have been caught recently:

http://www.flippingfrenzy.com/category/minnesota/

While many people see property flipping as deceitful and wrong, the truth is that while an seller may have hiked up a price and done the minimal rehabilitative projects that the house needed to get on the market again, no one is forcing these people to buy it. A woman in Baltimore purchased a home for $83,000 from a man who got it for $15,000 and when the city tore her neighbor’s house down, hers collapsed. While it may seem wrong to most people that this happened, the truth is that the man didn’t make her buy the house. She had the choice to have an inspection done and she chose not to. Unless he lied on the paperwork and marketed the house as something it wasn’t, the situation isn’t illegal.

Property flipping, when done with integrity, can be good for a neighborhood. It keeps the values of the surrounding houses up and the community healthy. It can also be a fun project for couples who don’t mind moving from place to place. When a legitimate investor hires contractors to fix up the home, he or she is giving jobs to the community. Most flipped houses are foreclosures and when they are purchased, it takes that burden off of the community and other house values instantly increase, and if you think about it, would you rather live next to some vacant house with a jungle yard, or a home that is cleaned and fixed up? (That is very much a rhetorical question, I know I would way rather live somewhere that I can charge people to go on a safari)

It seems that property flipping can be a pretty controversial topic in the real estate world, but when it is done well and with honesty, it has an overall positive effect on a community.

Articles on house flipping:

http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=2467

http://www.nhi.org/online/issues/113/focer.html

http://www.mkemortgage.net/content/house_flipping_434.htm

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