Flipping ,Legal or not? Can 3rd party person get bank to except 1 price and then flip it to another person for higher price at closing?

Asked by David B. Leventhal, Longboat Key, FL Thu Aug 12, 2010

Listing agent market this as short sale, but when offer was submitted, listing agent send addendum starting this is not a short sale to my buyers, for another 3rd party is trying to buy property at 170,000 then flip it to me for 189,000. This is listed as a Short sale based on lender approval, but addendum says this in not short sale and states that the 3rd party is trying to flip this. how can this be legal, does not the seller's bank need to knw this to be legal.

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Mike Payne, Agent, sarasota, FL
Wed Aug 18, 2010
Flipping is legal and ethical. Colleagues, PLEASE get informed on option contracts.... Even if you prefer not to work with investors (too bad!) you at least should be informed.

Once you see paperwork and FULL 100% transparent disclosure from honest, ethical real estate investors, you might wonder why you didn't get involved sooner.

TRANSPARENCY & FULL DISCLOSURE.

With pleasure, I work with investors, their attorneys & option contracts. These buyers do NOT flake out, leaving me (and the seller more importantly) with a short approval & no buyer. As convenient as it is to talk about back-up offers, you know as well as I that most buyers and their agents do not like back-up positions.

Mike Payne
REALTOR
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Private money lenders easily negate any seasoning guidelines.
0 votes
Donna and Tom…, Agent, Bradenton, FL
Fri Aug 13, 2010
It's not illegal (technically) but it is unethical, and the listing agent is in violation of the National Association of Realtors Code of Ethics.

The listing agent is ethically bound to bring the highest and best price to their client. If the listing agent participates in this, then they are committing an ethics violation because they are not bringing the best price to the seller, and in so doing are increasing the amount of seller's deficiency judgement (the amount they will have to repay to the bank after the short sale is closed).

Secondly, unless you are paying cash for the property, you will be unable to obtain financing. Banks require a minimum of 90 days between sales and are very opposed to any kind of flipping - its part of the reason we're in this housing mess now.

My suggestion is to walk from the sale. If everyone did this, we can stop this distasteful practice.
0 votes
Faye Doyle, Agent, Sarasota, FL
Thu Aug 12, 2010
I recently had a buyer make an appointment toi view one of my listings. They purchase the home (short sale) with the understanding that they can transfer the contract. I do not know how they do it but they did have a lawyer involved. They do keep the listing active. We did not proceed with the transaction for a few reasons. I have also have had phone calls from marketing companies soliciting my listings for this type of transaction. I have not moved forward with any of them. I do know it is impossible to get financing on flipped properties so these would have to be cash sales.
0 votes
Chris Lyon, Agent, Venice, FL
Thu Aug 12, 2010
David

If the second party is not paying cash they will not be able to get financing because of the 90 day waiting period. All lenders want a 12 month chain of title to make sure there is no flipping going on. I would think the bank allowing the shortsale would be intersted in what the listing agen is doing as well.

Good Luck
0 votes
Debra B Albe…, Agent, Port St Lucie, FL
Thu Aug 12, 2010
David,
Talk to your broker. My question is...Is It Cash? In our market a proerty needs to be owned for 90 days before you can make a sale. This is conventional and FHA that I know of. I would talk to an atty, or my broker. Also, I would report a data error to MLS service. This is very missleading to you and your customer. This is one reason our market is in such a mess to begin with!

Debbie Albert,
Coldwell Banker Residential
Web Reference:  http://www.ronanddebbie.net
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