Some Florida banker actually told one of our people that flipping houses is illegal. That's rather amazing, beause None of the Official Institutions agree. Not only that, there is more flipping activity in Florida than anywhere.
If someone tells you the same thing, please ask them where it's written. Ask them to cite any law, statute, ordinance, regulation or rule. If ever they can, we want to know about it, and so do lots of other good people.
The institutions at the right would surely know about it, and none of them says it's illegal. We did the heavy research for you, just in case you need the cites, and the official documents are clickable on the right.
You know, most good things can be perverted into evil. The automobile and prescription medicines are good examples. Driving a car into a crowd or abusing prescriptions are evil acts.
Similarly, flipping homes helps everyone, but it could possibly be perverted. We take extreme care to disclose absolutely everything to everyone, period. That way, nobody gets hurt and it's honorable.
David Mitchell
FREDDIE MAC SAYS "A well-known practice in the real estate industry is property flipping. Flipping is a legal and ethical practice when all representations of the property condition and value are true and accurate." (emphasis by webmaster.)
Freddie Mac describes a typical flip with added value and goes on to write the following
"This is a legitimate business transaction and there are many in the real estate market that make an honest living flipping properties."
FANNIE MAE shows how property flipping can assist fraudulent activity, saying: "The fraud occurs when a lender colludes with an appraiser who inflates values. True ownership is often concealed via a land trust or secret outside contracts. There may be excessive seller concessions paid to artificially increase the sale price. There may be a series of rapid sales, each with heavy increases in appraisal value." Even then, flipping the property is not illegal; it is merely a way to cash out the ill-gotten, artificially inflated value.
HUD and FHA continue to explain that the fraud is illegally inflating appraisals. We don't allow FHA loans to end-buyers because statistics show that more FHA loans fail than conventional loans. Our job is to keep people in their homes, not to set them up for failure with risky loans. We require 10% down and in most circumstances, 20% down.
BANK OF AMERICA writes loans for flipped properties, and certainly would not if flipping were wrong. Their paper lists a number of things, which when done right, make a flip legitimate and honest. We incorporated this list as part of our checklist.
The IRS has this excellent piece regarding the 2007 Debt Forgiveness Act, Insolvency and the Form 982. Read about it on their website.
