Turn Your Dead Real Estate
Leads Into Hard Cash!

We Buy Your Dead Leads!

Real Estate Contracts and Forms
We Are Seeking Private Lenders
Total Real Estate Solutions is seeking one or more private lending resources for a unique project. If you, or someone you know, is interested in learning more about this interesting, lucrative and well-secured opportunity, please click here and share a bit of info with us and we'll be happy to discuss the opportunity with you.
 Welcome Home
Home Page
Site Map
Reading Room
Real Estate Books
Real Estate News
Tools & Resources
Free Newsletters
Panel of Experts
Contact Us
Website Services
Real Estate Websites
Website FAQ
Showcase of Examples
FREE TRIAL WEBSITE!
Custom Template Design
Buying a Home?
Tips for Buyers
Featured Listings
Search Property Listings
Foreclosure Listings
Financial Calculators
Selling a Home?
Tips for Sellers
List Your Property
Listing Manager
Real Estate Pros
Foreclosure Listings
Affiliate Partners
Real Estate Talk
FREE Real Estate Forms
Contracts and Forms
Marketing Ideas
FREE Website Content
Resources and Links
Glossary of Terms
Top 100 Best
Real Estate Directory
Add Your Listing
Link To Us
 
 
Visit Our Sister Sites
Refrigerator Art Mktg
Network4Women
Top 100 Best Websites
Free Real Estate Sites
Real Estate Directory
FSBO Directory
Lender Directory
Home Builder Central
 

Real Estate Reading Room [General Real Estate]
Articles and Advice about General Real Estate from Real Estate Reading Room

Flipping Is Illegal !!
by Ron LeGrand

Oh No! All this time you've been telling me I could make a killing buying & selling (flipping) houses and now you're telling me it's illegal, Ron? Well, sort of! But before you get all upset, I'd better explain. Don't worry; you're not going to jail. Here's the deal. Illegal flipping is indeed illegal. But first, lets define flipping because it is a misunderstood term, sort of like the term "nothing down." When I say you can buy houses with nothing down, I mean you're not using your own money. That doesn't mean the seller doesn't get money. Some-times they don't and sometimes they get cashed out. But, it is NOT your money; it's a "nothing down" deal.

When you take over a loan "subject to" the mortgage, and the seller doesn't want any money, it's a nothing down deal. When you pay all cash but borrow the money from a private lender, it's still considered a nothing down deal. Thousands of people don't believe in the nothing down philosophy and aren't doing real estate because they simply don't understand the term, and therefore they?re convinced they can't buy houses without their own money. Their loss. A closed mind and an open mouth will keep you broke and working for those who are willing to learn.

Just try and tell my Boot Camp grads (especially those who have become millionaires because they refuse to listen to the morons) you can't buy houses without your own money. The same ignorance seems to be attaching itself to the term "flipping." Totally misunderstood and misrepresented.

Here's The Shocker.

Every house you buy and sell is a flipper. Whether you're in wholesale, retail, sell- on-lease-option or owner financing, you've just flipped a house. Most people use the term when applied to wholesaling, but it's all flipping. It's either a fast flip or a slow flip, but it's still a flip no matter how you look at it.

Ok Ron, So How Come It's Illegal?

The Answer Is It's Not.

The term "flipping" seems to be used by the media in cases where an investor bought a property and sold it a short time later. However in all the cases I've read, fraud was a part of all their deals. These investors made a practice of illegal activities and got away with it long enough for the long arm of the law to catch up to them...then they instantly became a news item. Flipping houses is not illegal. Fraud is. So what kind of fraud did these guys get in trouble over?

Here's A Short List Of Possibilities.

  1. Paying appraisers to grossly appraise properties to get bigger loans for themselves or their buyers.
  2. Rigging down payments to put unqualified buyers in houses that shouldn't be approved for the loan in which they?re applying for.
  3. Falsifying documents required to get a buyer approved such as pay stubs, verification of equipment, tax returns, verification of deposit, etc.
  4. Selling houses to unsophisticated buyers, representing them to be in good condition but covering up obvious problems to get the loan closed. This is the most abused type of fraud, and once discovered it leads to an investigation of all the investor?s activities and usually uncovers all other kinds of fraud.
  5. Back dating lease agreements to prove a track record of the tenant making payments on time and a year or more occupancy, when in reality the tenant just moved in. This is very common. I've had loan processors with large mortgage companies suggest I do it. The last time was on a $600,000 house. I asked the loan agent if he knew that was lender fraud. His reply was, "my boss said it was o.k. We do it all the time."

Just remember this. Anytime the deal is different than the contract presented to the lender, it's lender fraud. The loan is based on the stated facts. If you misrepresent those facts, it's fraud. Regardless of how many other people participate in the process.

O.K Back To Flipping.

What does lender fraud have to do with flipping and the stigma some of the media have placed on it? Some lenders have had so many loans default on lower priced properties sold by investors it's opened their eyes and made them cautious, and justifiably so, if I were a lender making loans at 80%-100% of the purchase price, I'd be cautious too. In fact, I'd be paranoid, but then again I'd be neither because I'd never even consider doing it.

I have no way of proving this, but if I had to guess, I'd say 75% of all loans closed to fund low income homebuyers contain some kind of false statement or fraud.

I know that's a bold statement, but I've been around a long time. Long enough to see numerous loan companies take a dive from bad loans. It's almost standard practice in the cheap house business to stretch the truth to get unqualified buyers qualified. This creates default and a bad name for those who operate within the law. That's exactly what has happened with the term "flipping." But, Ill say it again. Flipping is not illegal.

There's no law against agreeing to buy something at price and then finding a buyer at a higher price. Suppose you had a stereo unit you agreed to sell me for $500, and I told you I would pay you next month when I get my tax refund check (fat chance!). You agree to wait the 30 days it takes me to raise the money. We then sit down and write a letter stating that, and we both sign it.

A couple of days later, I'm talking to a friend who mentions he needs a good stereo. I decide to sell him the one I'm buying for $1,000 and make myself a $500 profit. Obviously I can't deliver his stereo until I give you $500 because you probably won't turn it loose until you get paid. However that doesn't stop me from searching for a buyer.

Once the buyer agrees, I can collect all the money in advance and pay you, collect a $500 deposit and pay you, or I can pay you first with my money and then collect from him. There's no law that says I have to pay you and take possession before I can talk to anyone about the stereo. If they were on Ebay, they'd have a problem. Half the stuff sold on eBay isn't in the possession of the person doing the selling. They agree to buy at a lower price from another auction site and put it up on Ebay. When it's sold, they simply have the old owner ship it to the new buyer.

That's called drop shipping and it's very common in any industry that sells products. That's exactly what we do with real estate sometimes. You don't have to own it to shop for a buyer. You simply must control it, which is what you do with a contract. The problem comes when lenders see investors buying at deeply discounted prices and selling for two or three times the amount a few weeks later. Some just assume there must be fraud somewhere to make such an unconscionable profit. You see, they haven't attended my Wholesale/Retail boot camp.

If you're buying and rehabbing houses it would be a good idea to document the work you've done to the house. Keep a file on everything you've spent to make a case on how you raised the value so quickly. You should also furnish before and after photos. It is also not a bad idea to create your own album to keep while you're doing this. It will help with future credibility with everyone you deal with including bankers for a line of credit.

If you're using private money from a loan broker, you probably have an escrow account for repairs. That means an appraiser may be supplying the mortgage broker with a completion certificate once the work is done. Get a copy and add it to the pile of evidence. Of course some lenders won't be happy with anything you provide and simply won't fund the loan unless you've owned the property for a year or more. I wrote a past newsletter article on six ways to get around that, but the best way to deal with lenders who don't want your business is . . .Whack 'em!

Flipping is not illegal. The length of time you own a house is your business. Making a killing is your right. Providing for your family is your obligation and the smartest thing you can do with people or institutions who want to make life difficult is cut them off at the knees and tell them to take a hike . . . and that's my final answer. They are the weakest link.

Before you even take a buyer to a lender for a loan, ask them right up front if your length of ownership is an issue. If they give you any indication that it's a problem, move on. The country is full of lenders and there is a ton of money available. They need you more than you need them. Don't take any crap from any lender and don't let them make you believe their rules are the law or even the norm.

Well, I'm getting tired now! It's been a long day of battling ignorance and skepticism and I'm worn out! I think I am going to go "flip" open the refrigerator and get a little snack, then "flip" on the shower, then "flip" down the bed spread and shut my eyes for the night. Life seems to be one flipper after another. Hope it's legal.


Ron LeGrand had to borrow money to attend his first real estate seminar twenty years ago when he was bankrupt and running a gas station. Today, he is recognized as the nation’s leading authority on buying and selling single-family homes for fast cash with no credit, little or no personal investment or risk. Ron has personally bought over 1500 houses and still invests in real estate.

Author, trainer, lecturer, consultant and entrepreneur extraordinaire, Ron has earned a reputation as the best in his field. His one-day workshops are routinely standing-room-only and his Boot Camps continue to grow in popularity. Ron’s secret is simple: his programs work -- as evidenced by the thousands of successful real estate entrepreneurs all across North America who call him by the affectionate title, “The Guru”. Ron is literally creating millionaires all over North America.

Learn More about Ron LeGrand at www.ronlegrand.com

Real Estate Reading Room HomeMore Articles in General Real Estate
More Articles by Ron LeGrand

Article Topics

Search Articles
Search Keywords


Popular Searches
short
money
foreclosure
seasoning
SHORT SALE

Contributors






Copyright © 2017 www.gotrs.com
Powered by inetUSA