This often involves a collaborative effort between a real estate investor, an appraiser, and the title company. The house typically is appraised for a much higher than market value and the loan is made based on this figure. Many of these loans are going bad, and the parties involved are facing criminal charges.

Lenders have taken an aggressive stand towards this issue. Most lenders will require the broker of record to remit any Yield Spread Premium received if the home is flipped inside of 4 months from the loan.

Most lenders also require a 6 month lien seasoning period to prevent flipping.

It is possible to legally invest and flip properties as long as you use real appraised values and get the right type of financing. There are investors who will arrange short term financing for these types of deals.

 

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