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  • Flipping IS Illegal

    I just finished an argument with a friend who owns two title companies and
    has been in the business for 15 years. She insists that flipping is illegal.
    She says most lenders want to see two years ownership and that so-called
    investors are defrauding/lying to the bank by using crooked title (closing
    agents) companies who aren't fully disclosing what's going on. She said it
    not "statutorily" illegal because if the buyer is using cash or private
    investor money, then it's no problem. But when it's done using financing
    sources that are FDIC insured they are breaking the law.

    When I was having the debate I was disagreeing with her, but the more I
    think about it. What she says makes sense. Lending institutions require full
    disclosure and there's no way they're going to let some vulture make $30,000
    and knowingly finance it. There has to be deception at some level to make
    these deals work. It's just common sense.


  • #2
    Flipping IS Illegal

    In us.legal.self-represent Baird Spalding <[email protected]> wrote:
    When I was having the debate I was disagreeing with her, but the more I think about it. What she says makes sense. Lending institutions require full disclosure
    They require only that each question they ask be answered fully, and that
    each document which is executed be fully accurate. Some lenders require a
    document be signed which says, in part, that the borrower intends to
    occupy the property as his primary residence. Absent such a document,
    what fraud is involved?


    and there's no way they're going to let some vulture make $30,000
    and knowingly finance it. There has to be deception at some level to make these deals work. It's just common sense.
    Common sense says that a heavier object will fall faster than a light
    object. But it doesn't work that way.

    Where and how is fraud involved?


    --
    Words are flowing out like endless rain into a paper cup,
    They slither while they pass, they slip away across the universe...
    -Lennon/McCartney

    Comment


    • #3
      Flipping IS Illegal


      On 10-Jul-2003, [email protected] wrote:
      They require only that each question they ask be answered fully, and that each document which is executed be fully accurate. Some lenders require a document be signed which says, in part, that the borrower intends to occupy the property as his primary residence. Absent such a document, what fraud is involved?
      Because the title companies underwriters all require FULL DISCLOSURE.
      "Absent such a document" is not full disclosure. Not showing Chain of Title
      is not full disclosure. Knowing an investor is involved and is scooping up a
      large profit without telling the bank is not full disclosure.

      Comment


      • #4
        Flipping IS Illegal


        On 10-Jul-2003, [email protected] wrote:
        and there's no way they're going to let some vulture make $30,000
        and knowingly finance it. There has to be deception at some level to make these deals work. It's just common sense.
        Common sense says that a heavier object will fall faster than a light object. But it doesn't work that way. Where and how is fraud involved?
        When doing a flip, or whatever you want to call it, does the bank know
        exactly what's going on? If they do know what's going on will they do it? Do
        they know that they're financing a 150k loan and the investor is getting 30k
        of it right off the bat? A simple yes or no please!

        Comment


        • #5
          Flipping IS Illegal


          "Baird Spalding" <[email protected]> wrote in message
          news:[email protected] ..
          On 10-Jul-2003, [email protected] wrote:
          and there's no way they're going to let some vulture make $30,000
          and knowingly finance it. There has to be deception at some level to make these deals work. It's just common sense.
          Common sense says that a heavier object will fall faster than a light object. But it doesn't work that way. Where and how is fraud involved?
          When doing a flip, or whatever you want to call it, does the bank know exactly what's going on? If they do know what's going on will they do it?
          Do
          they know that they're financing a 150k loan and the investor is getting
          30k
          of it right off the bat? A simple yes or no please!
          Flip what? There's some confusion on what a flip is. You buy a property and
          fix it (or not), then you sell a property. It's called a flip but it's
          really two deals. The investor gets the money at the closing of the sale.

          The only real flip I know is, you buy a property and get the right of the
          owner the fix it up but you don't close the deal (risky). Then you sell the
          place with a profit. The you can actually do a double closing. You close the
          buy at the same time as you close the sale at the title company. Then the
          first bank will NOT know that you (investor) get money at closing. They only
          get what was owed. What other interest could they possibly have? The title
          company cuts multiple checks. They pay off the first bank. They give the
          seller the amount he had in equity. You get your fix-up money back with your
          profit.

          Nothing is as simple as yes or no. It's not really clear from the former
          posts what you really want. But yes, some things get overlooked or can't
          really be enforced.

          Btw, loans for investors generally have higher requirements about qualifying
          ratios, your downpayment and the interest rate. If you disclose you want to
          resell quickly, you will have to pay a higher downpayment and/or a higher
          rate.

          If you buy a home and sign (an intention) that you will use it as primary
          residence it's ok. If things change after closing and you decide to sell
          it's ok too. The paper you sign is only an "intention to occupy" - but
          things change and you might need/want to sell. There can be no legal
          requirement to keep a home for two years: It's your **** property, you do
          what you want with it - and that's it. But you might have to pay a prepay
          penalty. Check the papers. Most mortgages don't have that any more.

          It's beneficial to buy a property with the intention to occupy. Then fix it
          up slowly and keep it for two years. You are then able to sell it tax free
          (no capital gains tax) after two years. Depending on price range, it saves
          you a lot of money. If you find another deal in between and you have the
          extra money, buy the another one and occupy it to get the cheaper loan and
          rent the first one (things change, remember - it was only an intention to
          occupy, and you did - but you found a better, nicer, bigger, smaller or
          whatever home, so you will be moving). This will require you to have a
          signed lease if you credit is not that great and the bank will only accept
          70% or 80% as income. Remember that if you this to often, banks will not
          "buy" it any more that you are relocating, upsizing, downsizing or something
          like that.

          There is no flipping in sense of the law. You buy and you sell. Nothing
          illegal at all.

          And there is no vulture. The vulture in called investor. He uses his good
          credit or money to buy a rundown property and improves upon it. He will
          improve the value, of course and yes, banks will the lend more money so that
          he can get paid. Vulture - ha ha ha.


          Comment


          • #6
            Flipping IS Illegal

            In us.legal.self-represent Baird Spalding <[email protected]> wrote:
            occupy the property as his primary residence. Absent such a document, what fraud is involved?
            Because the title companies underwriters all require FULL DISCLOSURE.
            The buyer never enters into any contractual relationship with the "title
            company underwriters" around here. However, they are required to sign
            certain affidavits. If none of those documents contain a representation
            regarding how long one intends to own the property, I still can't
            understand how the buyer is doing anythingn wrong.

            In your jurisdictin, is there a statute or a document which requires the
            buyer to disclose anything and everything that the title company MIGHT be
            interested in? Why can't the title company protect itself, and draft
            documents which cover everything they might be interested in?

            I'm not trying to be a wiseass, I just don't see why a buyer would have
            any obligation to disclose such a thing if nobody ever asks him.
            "Absent such a document" is not full disclosure. Not showing Chain of Title is not full disclosure. Knowing an investor is involved and is scooping up a large profit without telling the bank is not full disclosure.
            Maybe I don't fully understand what you mean by "not showing Chain of
            Title" and "an investor is involved". How do these fraudulant
            transactions work? What are the steps involved? And sho is liable, the
            investor (the guy doing the flipping) or the ultimate owner (who intends
            to move in to the home)?

            --
            Words are flowing out like endless rain into a paper cup,
            They slither while they pass, they slip away across the universe...
            -Lennon/McCartney

            Comment


            • #7
              Flipping IS Illegal


              On 10-Jul-2003, [email protected] wrote:
              In your jurisdictin, is there a statute or a document which requires the buyer to disclose anything and everything that the title company MIGHT be interested in? Why can't the title company protect itself, and draft documents which cover everything they might be interested in?
              Well, Florida's middle name is fraud, so maybe they're more sensitive.
              I'm not trying to be a wiseass, I just don't see why a buyer would have any obligation to disclose such a thing if nobody ever asks him.
              The problem is you have a house that was technically sold, but not being
              recorded as sold. If it was closed on, the bank will see by the chain of
              title that it was just bought. Even if the investor doesn't close, you have
              an assigned contract which is a smoking gun. Maybe you can rewrite the
              contract so the investor isn't mentioned, but then you need a ghost, or side
              contract that the bank doesn't see. I see no way to use conventional
              financing without using deceit. If you know of a way please tell me.

              Comment


              • #8
                Flipping IS Illegal

                "Baird Spalding" <[email protected]> wrote in message
                news:[email protected] ...
                The problem is you have a house that was technically sold, but not being recorded as sold. If it was closed on, the bank will see by the chain of title that it was just bought. Even if the investor doesn't close, you
                have
                an assigned contract which is a smoking gun. Maybe you can rewrite the contract so the investor isn't mentioned, but then you need a ghost, or
                side
                contract that the bank doesn't see. I see no way to use conventional financing without using deceit. If you know of a way please tell me.
                You've never heard of a "straw man". Often used by people trying to avoid
                publicity, a straw man is the person who makes the actual purchase but is
                not the actual owner. The straw man is the conduit through which the sale is
                made. I've acted as a straw man for my father when he wasn't able to attend
                a land auction. I'm the person who signed all the papers and handed over the
                money, but he was listed as the actual owner. According to you, I should
                have been recorded as the owner first. No good purpose would have been
                served by this since I was never intended to be the owner. Thus, there is no
                break in the chain of title by not including me.

                --
                If you have had problems with Illinois Student Assistance Commission (ISAC),
                please contact shredder at bellsouth dot net. There may be a class-action
                lawsuit
                in the works.



                Comment


                • #9
                  Flipping IS Illegal

                  "Baird Spalding" <[email protected]> wrote in message
                  news:[email protected] ..
                  Do they know that they're financing a 150k loan and the investor is getting
                  30k
                  of it right off the bat? A simple yes or no please!
                  Why is it any of the bank's business what the seller does with the money?
                  Contrary to what some people may think, *profit is not illegal*.
                  --
                  If you have had problems with Illinois Student Assistance Commission (ISAC),
                  please contact shredder at bellsouth dot net. There may be a class-action
                  lawsuit
                  in the works.



                  Comment


                  • #10
                    Flipping IS Illegal


                    On 10-Jul-2003, [email protected] wrote:
                    Some people would sign purchase agreements on condos with the right to close in the future - maybe 4 or 5 months in the future. They speculated that by then, the condo would be worth much more than they paid. So they immediately started looking for a buyer at a higher price.
                    "More than they paid?" They didn't pay. They encumbered, but they didn't
                    pay. If the market declined, they could back out, if it goes up, they
                    prosper big time. Isn't there something wrong with that picture? If YOU were
                    an investor in the bank that funded the condo project, how would you feel
                    about it?

                    Comment


                    • #11
                      Flipping IS Illegal


                      On 10-Jul-2003, "Scott Hedrick" <[email protected]> wrote:
                      A property investor's profit is not the business of the bank and doesn't need to be disclosed.
                      The title company's underwriter and the bank, I suspect would disagree.

                      Comment


                      • #12
                        Flipping IS Illegal


                        On 10-Jul-2003, "Scott Hedrick" <[email protected]> wrote:
                        According to you, I should have been recorded as the owner first. No good purpose would have been served by this since I was never intended to be the owner.
                        No, you didn't INTEND to be the owner and profit from the transaction. Not
                        the same thing.

                        Comment


                        • #13
                          Flipping IS Illegal

                          "Baird Spalding" <[email protected]> wrote in message
                          news:v7nPa.1030$x%[email protected]
                          On 10-Jul-2003, "Scott Hedrick" <[email protected]> wrote:
                          According to you, I should have been recorded as the owner first. No good purpose would have been served by this since I was never intended to be the owner.
                          No, you didn't INTEND to be the owner
                          Neither does the flipper. So what?
                          and profit from the transaction.
                          I didn't say anything at all about profit. While I didn't try to profit off
                          my father, there's *no reason at all* why I couldn't profit well doing the
                          same for a third party. *Profit is not illegal or wrong*.

                          --
                          If you have had problems with Illinois Student Assistance Commission (ISAC),
                          please contact shredder at bellsouth dot net. There may be a class-action
                          lawsuit
                          in the works.



                          Comment


                          • #14
                            Flipping IS Illegal

                            "Baird Spalding" <[email protected]> wrote in message
                            news:a9mPa.648$x%[email protected]
                            On 10-Jul-2003, [email protected] wrote:
                            Some people would sign purchase agreements on condos with the right to close in the future - maybe 4 or 5 months in the future. They
                            speculated
                            that by then, the condo would be worth much more than they paid. So
                            they
                            immediately started looking for a buyer at a higher price. "More than they paid?" They didn't pay. They encumbered, but they didn't pay.
                            That is exactly the same thing that happens with a purchase contract. As a
                            real estate broker, I can assure you that real estate purchase contracts are
                            not against the law.
                            If the market declined, they could back out, if it goes up, they prosper big time. Isn't there something wrong with that picture?
                            No! Why do you think there is?

                            If YOU were
                            an investor in the bank that funded the condo project, how would you feel about it?
                            I'd feel that I should have gotten a part of the action, and I'd contact the
                            "flipper" about it.
                            --
                            If you have had problems with Illinois Student Assistance Commission (ISAC),
                            please contact shredder at bellsouth dot net. There may be a class-action
                            lawsuit
                            in the works.



                            Comment


                            • #15
                              Flipping IS Illegal

                              Come on Baird.
                              You have no idea what you are even asking and you obviously have a friend
                              who is an idot.


                              Comment

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