Scammers will purchase properties, make only minor improvements, and then resell them at artificially inflated prices in an attempt to make a handsome profit.
Video Transcript
Hello, I'm a Special Agent with the FBI, and this is Mortgage for the Common Man minute. Today's topic is illegal real estate flipping schemes.
Before the recent mortgage crisis, property flipping was a common way to make money in real estate: buying a house, fixing it up, and selling it for more than you paid for it. It was and still is legal.
But there are also illegal property flipping schemes out there. Here's how they work: Scammers buy a property, make only minor improvements, and then resell it at an artificially inflated price in the hopes of making a handsome profit.
For this scheme to work, the scammers need to find someone to buy the property quickly, so they contact friends and acquaintances, telling them they can make thousands of dollars just by applying for a loan to buy the house. This person is called a “dummy buyer” because they have no intention of living in the home.
The scammer also pays an appraiser a fee and has them submit a fake, artificially inflated appraisal report to the bank. The bank makes the loan to the dummy buyer. The scammer may also make one or two mortgage payments to the lender. The scammer then keeps the remaining money for himself after paying off the dummy buyer and the appraiser. The bank then forecloses on the property, resulting in a huge loss on a home that is not worth the amount the bank loaned.
If someone has asked you to take part in an illegal real estate flipping scheme, or you are aware of such a scheme already underway, we encourage you to contact your local FBI office.
This segment of “One Minute Mortgage for the Common Man” is brought to you by the FBI.