House flipping is becoming a more and more popular way to make money in California. Being profitable as it is, fraudsters find it propitious to con new buyers. However, there are measures you can take to protect yourself.
How house flipping fraud occurs
The most common way real estate fraud occurs is when a fraudster purchases a property, makes some cosmetic changes and then sells it for an inflated price. This can be difficult to spot, as the changes may not be obvious to the untrained eye.
Another way is by promising them a share of the profits from selling the property but never actually selling it. This leaves the victim out of pocket and without any recourse.
A con artist can also use mortgage fraud to bilk investors. In this type of fraud, the fraudster will secure a mortgage on a property using false information. They may overstate their income, inflate the value of the property, or use straw buyers to qualify for the loan. Once the loan is approved, they will take the money and disappear, leaving the investor responsible for the debt.
How to protect yourself from fraud
If you are considering house flipping as an investment, there are some steps you can take to protect yourself from fraud:
• Research the market carefully before making any decisions.
• Get a professional opinion on any property you are considering purchasing.
• Never sign anything without reading and understanding it first, including contracts, mortgage documents, and any other paperwork associated with the purchase or sale of a property.
• Beware of anyone who is pressuring you to make a decision quickly or who seems to be hiding important information from you.
• Never give anyone money upfront for a “guaranteed” return on your investment.
If you believe that you have been the victim of real estate fraud, you can file a police report, contact the California Attorney General’s Office, or file a complaint with the Department of Real Estate. Also, if you have any suspicion that something may not be right, it is always better to err on the side of caution by avoiding the transaction altogether.