A home flipping scam is a type of real estate fraud in which a con artist buys a property, makes minimal improvements, and then sells it for an inflated price. The scam often involves the use of falsified appraisals, straw buyers, and other fraudulent practices.
How Does a Home Flipping Scam Work?
The con artist will typically buy a property in a distressed market for a low price. They will then make some minor improvements to the property, such as painting, carpeting, or updating the kitchen. However, the improvements are often superficial and do not add significant value to the property.
The con artist will then hire an appraiser to appraise the property. The appraiser will often be willing to falsify the appraisal report, inflating the value of the property. This allows the con artist to sell the property for a much higher price than they originally paid for it.
In some cases, the con artist may use a straw buyer to purchase the property. A straw buyer is someone who agrees to buy a property on behalf of the con artist. The straw buyer will typically have good credit and a high income, which makes them appear to be a qualified buyer. However, the straw buyer will not actually live in the property. They will simply sign the paperwork and then turn the property over to the con artist.
How to Avoid a Home Flipping Scam
There are a few things you can do to avoid becoming a victim of a home flipping scam:
- Do your research. Before you buy a property, be sure to do your research and understand the market value of the property. You can use online resources, such as Zillow or Trulia, to get an estimate of the property’s value.
- Get an independent appraisal. Even if the seller provides an appraisal, it’s a good idea to get your own independent appraisal. This will help you to ensure that the property is actually worth the price that you’re paying.
- Be wary of sellers who are in a hurry to sell. If the seller is in a hurry to sell the property, it’s a red flag. This could be a sign that they’re trying to unload a property that they know is overpriced.
- Don’t use a straw buyer. If the seller asks you to use a straw buyer, be sure to ask why. This could be a sign that the seller is trying to hide something.
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