The property market may have distorted but real estate flipping is active and well in the form of a new practice dubbed flopping.
In fact the nation’s mortgage services don’t, either. Suspicious real-estate transactions have surged in the past two years, analysts say, along with the number of short sales, in which a house is sold for less than the amount of its remaining mortgage.
Short sales are hypothetical to be arms length transactions without any relationship or conspiracy among the parties, all of whom must sign affidavits to that effect. But the parties often are connected.
Flopping 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. The it has found numerous instances in which organized-crime groups were involved in short-sale fraud.
For the most part, these deals involve insiders, from the underwater borrowers themselves to investors, listing agents, brokers providing valuations and so-called facilitators or middlemen negotiating with the banks and buyers trying to flip the properties.
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