Real estate ‘flopping’ creating fraud in the home buying market

Fraudulent short sales have increased drastically over the last two years as investors acquire distressed properties at a steep discount.

November 27, 2013

Suspicious real-estate transactions have surged in the past two years, analysts say, along with the number of short sales. Short sales are supposed to be "arms-length" transactions without any relationship or collusion among the parties, but the parties often are connected. In some cases, this type of mortgage fraud involves buyers acquiring distressed properties for a portion of their value. The rest involve "flopping," where an investor – with the help of an agent or middleman – persuades the bank to agree to a much steeper discount than it should, and immediately resells the property to another buyer for a significant profit without having made any improvements.

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