I just wanted to make people aware of this problem, I’m not sure if it has been covered on the forum before but my husband and I were victims of this scam.
It is a RE industry scam apparently called “flopping”, where a person is trying to get your property sold as quickly as possible (we’d found our dream house and wanted to get the ball rolling) and someone comes in offering to buy it fast.
The person selling up wants to get shot of their house, so agrees to sell it for a lower price than the asking price. It gets sold, and all seems well until the house comes up for sale at the original price, with absolutely nothing done to it. This means the seller has just lost out on a significant amount of money.
It’s different from “flipping”, which is where people buy and improve homes quickly for profit. Nothing gets changed at all, they don’t even bother repainting it or adding anything to the value of the house, they just buy it at a lower price from some poor homeowner and then make money for themselves on it.
This happened to us, and I wish someone had told me about this before. If we hadn’t been so quick to sell it might not have happened, but it would have been great to have some advice beforehand.
I’ve now read up on this RE industry scam and it seems even RE agents can be in on it, and will deliberately withhold any higher sale offers so that they can score the house themselves at a lower price. It really is a scandal, I don’t know how people get away with it!
So heads up if you’re looking to get rid of your house fast, sometimes it is worth the wait!
Until I got to your last paragraph, I was thinking "not a scam, just an impatient seller willing to sell low for the convenience of being out of the property." However, a realtor withholding offers puts a different slant on it.
Do you believe that your realtor withheld higher priced offers or actively discouraged buyers who may have extended higher priced offers?
Flopping includes mortgage fraud and artificially deflating the property's valuation during the short sale process. Different versions of it exist. It may involve option contracts, counterfeit repair estimates, fraudulent property photos and/or withholding higher offers. Sometimes the original seller colludes with a straw buyer and they split the valuation differential.
Unfortunately, some banks tried to quickly process their foreclosure backlog and didn't complete adequate due diligence to determine valuations. They now frequently include a provision in their documents preventing resale of the property within a certain period of time to prevent the scam.
ETA: By definition, IMHO, without the mortgage fraud, it's not considered a flop. In a normal, move-up transaction (no short-sale, not a distressed property), the buyer may add value by reducing the seller's carrying costs and allowing them to purchase their move-up property. Yes, the realtor might benefit if he/she received commissions on both transactions. Without some other type of fraud, however, those transactions wouldn't be illegal, IMHO.This message has been edited. Last edited by: SurfNow,
I personally have never heard the term flopping.
Sorry for your bad experience.
Now flipping yes.Flipper Buyers come in and buy a house in poor condition and/or desperate sellers financial position. Don't blame the Realtors, as we are required to present all offers by law.
No one talks the seller into anything, and the decision is the sellers decision...accept, reject or counter offer.
Short sale property sales are confirmed and protected by the sellers'lender first they obtain appraisal or BPO (Broker Price Opinion)bonifide and based on true sold comps. And- yes the SELLERS LENDER can confirm to ACCEPT a lower price the seller accepted and eat part of the existing mortgage...REJECT..the deal
or COUNTER OFFERThis message has been edited. Last edited by: real estate lady,
During a flop, the bank accepts an undervaluation of the property.
nothing new..not a scam ..banks boss.. they can take a loss ..their decision ..short sales or REO's.
Just never heard of the term flopping, flopper or floppee.
Course sometimes I look like that in the morning.This message has been edited. Last edited by: real estate lady,
Agree, real estate's an imperfect market. During a flop, however, as mentioned previously, the banks significantly undervalue the property as a result of fraud - not because they simply booked a loss against their loan loss reserve or an employee/agent made an error.This message has been edited. Last edited by: SurfNow,
Add me to the list of never hearing of the term. I always feel for people who are in the bind of having to sell quickly to get the house they really want. I'm of the opinion there will always be another house down the road, but I only have the one to sell and I need to make the most of it.
There will always be people who want to take advantage of those they sense are desperate. I frequently see the little signs from fly by nighters advertising - I will by your house, cheap.
If the offer was too low - you do not have to accept it. You can always counter. At that point your agent should be doing his/her job of getting you the best deal possible.
Fun and Info
Sometimes the sellers themselves participate in the fraud. If their deficiency's waived by the bank, they sell at the lower amount to an associated party and then resell very shortly thereafter at a significantly higher amount, pocketing the difference after giving their associate and any other involved parties a cut.
These cases involve significant valuation differences of say, 35% plus - not a mere 5-15% discount in exchange for providing the seller with a quick sale. The frauds were discussed a year or two ago in the press, especially in the heavy f/c states of FL, CA, etc.This message has been edited. Last edited by: SurfNow,
What you are describing is short sale, when
the existing mortgage is in excess of what the market can bear. "Short Sale" is a vehicle that is legal, well respected in the industry, and a method to move property a downstream marketplace. The property and the seller must qualify for the short sale.
Investors, like planned occupant buyers, also buy short sales. Yes, they flip the home or sometimes rent it out. However, there are time limits also called seasoning period, before a new buyers lenders will allow the loan.This message has been edited. Last edited by: real estate lady,
Seems like the OP came, posted and disappeared into the night. SurfNow, with all due respect, you don't know what you are talking about...
Yes, REL, classic description of a short sale - all legal no matter how much we wish they wouldn't happen. Thankfully, the last of the bubbles are bursting....
The fraud comes into SurfNow's description with the introduction of an "associated party" participating in the purchase of the home at a much lower price. In short sales both sides must sign off on having NO knowledge of the other party. If they lie then they are setting themselves up for fraud.
Fun and Info
You're correct, Charming. Without the element of fraud during a flop, in general, nobody reaps an unusually large, above-market profit.
If they were ordinary short sales, we wouldn't call them "flops".This message has been edited. Last edited by: SurfNow,
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