Real Estate Fraud
Property Flipping

Property flipping has often been at the heart of many real estate crimes. Yet. most people do not know the term or what is involved or how it harms every one.

Defining Property Flipping

By Michele Johnson
Tuesday. 10 January 2007

During the past three years I have focused on property flipping and why it is destroying inner cities.

Many of us have seen those late nights shows promising riches in real estate by simply flipping properties. We have all seen the people on these shows waving checks around proclaiming they no longer have to go to work everyday because they are making big dollars.

Just imagine how wealthy the guys selling these get-rich-quick schemes are?

Buffalo, New York was a market ripe for flipping especially the East Side. In the 1980s and most of the 1990s several local gentlemen began flipping homes to people, targeting lower-income families selling them the dream of home ownership.

Of course home ownership is the American Dream and they made it seem easy. They handled everything from getting them a mortgage, an attorney, an appraiser, and in some cases even helped with the down payment.

These homes were purchased mostly from homeowners in almost all cases for under $15.00 and sold usually for double the price. The neighborhood was changing, people were scared and their fears were fed with the idea that property values would plummet because of the changes and it's probably better to get out while you can.

The lower-income families purchasing these homes had no idea they were paying double what the seller paid for them nor did they know much about homeownership.

Predatory lenders were used in many cases. These lenders weren't concerned if the people could afford these homes. Many were FHA insured meaning they would get their money if the property was foreclosed on anyway, so, it wasn't a risk to them.

Many of these houses were given a cosmetic makeover. New carpeting and fresh paint does alot to make a house look more appealing.But many of these homes already being 80-100 yrs old needed work and choosing between fixing your furnace and paying your mortgage payment were choices these homeowners had to make.

The estimations of properties flipped on the East Side is about 400 homes. The estimations of the 400 homes that went into foreclosure are about 360.

We all know what happens when we have one or two 2 houses on a street uncared for. Blight spreads like wildfire and it did property values continued to plummet making East Side housing prices sink so low that it put Buffalo on the radar screen to out of state flippers.

The internet was the way they found us and it was the way they would sell the houses to people all over the world giving a new meaning to absentee owners.

Property flipping is NOT illegal. Misrepresentation and Fraud is! So far we have seen houses on the demo list being sold as prime real estate in great neighborhoods.We have heard from people all over the world who found out they were duped and wanted to know what they should do?

I have sat with a woman who cried because she spent her life savings on properties in such bad shape they were deemed uninhabitable.Many others abandon the properties when they found out what they bought. Giving us a whole new set of issues to contend with locally. The percentage of properties flipped on the internet that are successfully rehabbed is about 20 percent.

The Anti Flipping Taskforce is made up of a group of very dedicated individuals including the FBI.HUD officials. The City of Buffalo, Realtors, Assemblymen, Sam Hoyt, Senator Stachowski, the WNY Law Center, Appraisers, The BNAR, and the most amazing students from Hilbert College Crime Economics Dept that process the data into a specialized computer program that shows the history of the property, the owners, purchase prices etc.

Also Buffalo State college who develop mapping systems showing us statistics and some wonderful GIS mappings. The Taskforce was modeled after Baltimores highly effective Taskforce that ultimately made over 40 arrests.

We have individuals working daily on our task force and every property flipped is being investigated.

The work being done is truly amazing and what will come of it will be equally amazing.

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