New York Real Estate Fraud Attorney Describes Property Flipping Charges
Property flipping is a common practice in the real estate industry and involves purchasing a property and then turning around and reselling it for a larger sum of money, often after doing some improvements. Property flipping is legal, but can cross the line into fraud when false representations are made regarding the property’s condition and value.
When property flipping crosses the line into a fraud offense, a defendant can face criminal charges on the federal or state level.
A New York City real estate fraud defense lawyer can represent clients accused of fraudulent flipping or involvement with property flipping fraud. Call Bukh Law Firm today to get help defending yourself if you have been accused of a crime.
What is Illegal Property Flipping?
Illegal property flipping typically occurs when a home is bought and then sold a very short time later at an inflated price. Typically, a fraudulent appraisal is also a part of this real estate fraud scam. The appraisal may set the value of the house as if improvements have been made to the home when either no improvements were made or only minor cosmetic changes occurred.
Illegal property flipping scams can also take the form of cash-out purchase fraud. This scam involves an investor or buyer approaching a property seller and making an offer that is higher than the current list price of the home, with the stipulation that the additional funds over the asking price should be given to the buyer at closing. An inflated value is used to support the higher price, usually by claiming that improvements have been made even when they haven’t. Typically, these types of properties end up in foreclosure.
FHA Property Flipping
The Federal-Housing Administration provides backing for loans and makes it possible to get loans with low down payments. In 2010, a policy change to the FHA standards made it possible for home buyers to quickly flip properties. While the FHA normally does not finance short-term house flips, the agency relaxed its rules to try to help stimulate repairs and sales in neighborhoods that had been hit hard by the foreclosure crisis.
Prior to the change in regulations, the FHA required an investor or rehab specialist to own a home for at least 90 days prior to reselling it at a higher price using FHA financing. When the FHA waived this rule, it became possible to resell properties more quickly.
The FHA, however, recognized that this waiver could lead to illegal property flipping because rundown homes were being sold and then resold in days with little more than a few cosmetic changes. The FHA thus reinstated the 90-day standard as of December 31, 2014, making FHA property flipping more difficult since the home has to be held for longer.
Penalties for Illegal Property Flipping
Penalties for illegal property flipping vary based on the circumstances. In some cases, the transactions may be considered bank fraud if there is proof that one of the goals of the fraud scheme was to use a scheme or artifice to obtain funds from a bank. This can lead to federal criminal charges under 18 U.S. Code Section 1344. The penalties for this offense are 30 years imprisonment, a $1,000,000 fine, or both. A defendant could also be charged with mail fraud and wire fraud under federal law, or residential mortgage fraud under Article 187 of the New York Penal code.
How a Property Flipping Fraud Lawyer Can Help
A property flipping fraud lawyer can provide you with legal advice if you are charged with any offenses related to the illegal flipping of a property. Because there is often a fine line between a legal flip and an illegal one, your defense attorney can often make a convincing argument that you did not violate the law.
Bukh Law Firm has extensive experience representing clients accused of property fraud and other real estate fraud.
Give us a call today to learn how our attorneys can help with your case.