‘Flopping’ a New Kind of Real Estate Scam
Here’s an interesting article about “flopping” from my favorite financial website, Bloomberg. This is not to be confused with the theatrical flopping that European soccer payers exhibit when they are accidentally grazed by an opponent on the field and then fall to ground and grab their left eye, like it was just hooked on a fishing line. This kind of flopping is a scam involving home buyers or investors who coerce lenders into short selling a property for far less than market value, then quickly turn around and sell the property for a profit to other buyers they have already lined up. In some cases, these frauds are perpetrated by actual agents.
One company estimated that this type of short selling scam is costing lenders $50 million per year in lost profits. Ouch! Not only do banks become a victim of these crimes but so do the home owners, who may be responsible for making up some of the sales shortfall. Independent appraisals and a deep understanding of market conditions around short selling can help sellers and lenders from falling for these sorts of scams. Anyway, I’m fascinated by financial crimes so I figured this was worth sharing.