Don't Get Flopped On By This Short Sale Scam

Not everyone sells their home because they want to. Sometimes a home sale is required to avoid a financial disaster, such as foreclosure. Unfortunately, this type of dire circumstance tends to attract an unsavory element who employ a number of tactics to scam people out what they're rightfully owed, and one of those tactics is called flopping. Here's more information about this real estate scam and how you can avoid it.

Understanding Flopping

Flipping is the valid real estate practice of purchasing properties, rehabilitating or improving them, and then selling them for profit to new buyers. Flopping, on the other hand, only involves purchasing properties and immediately reselling them for profit.

Unlike with flipping, people who engage in flopping deliberately look for properties where the owners have financial incentive to sell (e.g. active foreclosure) and buy the homes for far less than their value. When the banks approve the short sale—because, for them, it's better than getting nothing—these investors immediately turn around and resell the homes for immense profit to others who are often co-conspirators.

Flopping hurts homeowners in a couple of different ways. First, homeowners in foreclosure are often on the hook for any shortfall between what the home sells for and the remaining amount on their mortgages. So the bigger the gap, the more they have to pay off when all is said and done. Even if the bank forgives the mortgage deficiency, the homeowner still has to pay taxes on that debt as the IRS views debt forgiveness as a form of income.

Second, the extra money the homeowner could've gotten for the home could've been used to help them pay off other debts or recover from their financial problems.

Avoiding Flopping

Flopping typically involves several people. One person severely devalues the home by either misrepresenting the market value of the property (e.g. reporting that it's lower than it actually is) or preventing the homeowner from receiving legitimate offers, leading the person to believe the price they're asking for is too high. When they finally do receive an offer from the flopper, they jump at the chance to sell and be done with the situation.

One way to avoid this problem is to hire a reputable real estate agent who will accurately prices your home and help you steer clear of low-ball offers that have no basis in reality. Another thing you can do is have your home assessed by a third-party professional who has no affiliation with anyone in the sales process so you can get an unbiased report on the market value of your home.

For more information about this issue, contact a real estate agent such as those as OCALA LUXURY.