The Definition of Property Flipping
Before I go any further, you first need to know what the term property flipping means. Property f lipping is generally defined within the real estate investment industry as: “the process of buying a property and quickly reselling it for a profit.”
Today, thanks in large part to news reports by the media, the term property f lipping has pretty much become synonymous with fraud. But contrary to what many uninformed members of the media would want the American public to believe, there is absolutely nothing illegal, immoral, or unethical about making an honest profit from legitimately f lipping a piece of property.
It is called capitalism and is what our economic system is based on.
The HUD Rule Prohibiting Predatory Property Flipping with FHA Loans
The U.S. Department of Housing and Urban Renewal (HUD) defines predatory property flipping as: “the practice whereby a property recently acquired is resold for a considerable profit with an artificially inflated value, often abetted by a lender ’s collusion with the appraiser.”
And on June 2, 2003, HUD imposed a rule that places time restrictions on the resale of properties financed by Federal Housing Authority (FHA) loans. This was done in an effort to try to curb predatory lenders and dishonest real estate investors from ripping off unsuspecting homebuyers by reselling or f lipping properties at artificially inf lated sale prices.
However, as far as I am concerned, the only thing that this rule has accomplished is to stop honest investors from using FHA loans. I suspect that crooked investors, appraisers, and lenders are still using FHA loans to perpetrate fraud; they are just using more sophisticated scams, which HUD has not caught on to yet!
For a detailed explanation of HUD’s rule against predatory property f lipping, log on to the following web site: www.f lorida.ctic.com/bulletins/2003/2003-03.pdf
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