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Flipping is a term, used primarily in the United States, which refers to the practice of buying an asset and quickly reselling ("flipping") it for profit. Image File history File links Unbalanced_scales. ... Shortcut: WP:NPOVD Articles that have been linked to this page are the subject of an NPOV dispute (NPOV stands for Neutral Point Of View; see below). ... Wikipedia does not have an article with this exact name. ... Wiktionary (a portmanteau of wiki and dictionary) is a multilingual, Web-based project to create a free content dictionary, available in over 150 languages. ...

Though flipping can apply to any asset, the term is often applied to the practice of buying real estate at below market value, making needed repairs and improvements to the property, and reselling it for a higher price (generally near market value), thus making a profit. The term is also used to apply real estate purchases where no improvements were made; a buyer simply takes advantage of market fluctuations, or knowledge that land prices will soon increase, to make a profit. Real estate is a legal term that encompasses land along with anything permanently affixed to the land, such as buildings. ...

Types of Flipping

Multiple Investor Flip

Under the multiple investor flip, one investor purchases a property at below market value, sells it quickly to a second investor, who subsequently sells it to another party.

Fix and Flip

Under the "fix and flip" scenario, an investor will purchase a house at a considerable discount from market value. The discount may be due to the house's condition (i.e., major renovations and/or repairs needed) or due to the owner(s) needing to sell a house quickly (i.e., relocation, divorce, pending foreclosure).

The investor will then perform necessary renovations and repairs, and attempt to make a profit by selling the house quickly at a price nearer to full market value.

It is this type of scenario that is featured on the numerous reality shows which show amateur investors getting into this business.

Negative effects of real estate flipping

Many experts blame the US real estate bubble in 2004 and 2005 on investor speculation and "irrational" flipping. Very low interest rates were a root cause, but speculation and flipping compounded the bubble. Although the practice of flipping existed long before the real estate bubble, it became more rampant and widespread in those years. Flipping was so popular nationally that some DIY television programs detailed the process. Flipping trends have historically ended in disaster, such as during the Florida Real Estate Crash of the 1920s.^[1] In 2006 we see, reported by USNEWS on Wed June 14 2006, that the "Housing bubble correction could be severe."^[2] The current US property bubble is the United States economic bubble in real estate following the stock market bubble in the 1990s called, among other things, the dot-com bubble. ... Year 2004 (MMIV) was a leap year starting on Thursday of the Gregorian calendar. ... Year 2005 (MMV) was a common year starting on Saturday (link displays full calendar) of the Gregorian calendar. ... See also: DIY Network, a cable TV network. ... Arial photo of Miami dated 1927, with the newly-constructed Venetian Islands visible as well as the beginning of the doomed Isola di Lolando project. ... Year 2006 (MMVI) was a common year starting on Sunday (link displays full 2006 calendar) of the Gregorian calendar. ...

Flipping can play a role in the gentrification of older communities. As flipping occurs more and more in a community, the total cost of living there can rise substantially, essentially forcing the local people, specifically the younger generations, to relocate. During the real estate bubble, flipping and gentrification both have been linked to the mass migration of Californians to the (once much) less expensive areas of the surrounding states such as Arizona, Nevada, Texas, Oregon and Washington. This migration of Californians caused further gentrification in the areas that they had moved to en masse. Areas such as Phoenix, AZ and Las Vegas, NV which were once very inexpensive to live in prior to the real estate bubble are now quite expensive. The chain reaction continued (continues?), as the gentrified people of these cities had to find somewhere cheaper to live to maintain their standard of living, where they undoubtedly caused gentrification of their own.^{[citation needed]} The tone or style of this article or section may not be appropriate for Wikipedia. ... Phoenix is the capital, largest city and largest metropolitan area in the state of Arizona, United States. ... This article is about the city of Las Vegas in Nevada. ...

The other significant adverse financial aspect of the mentality of "flipping" is when interest rates increase. The resulting lack of sales, and major price depreciations (often far below) their previous increases, results in a flood of properties on the market at one time, not selling due to lack of buyers, causing a meltdown of a local market and potentially the economy as a whole. As the Wall Street Journal reported on Wed June 14 2006 that in the overheated and overvalued Menlo Park, CA area prices have fallen 22.6% year over year.^{[3][Quotation from source requested on talk page to verify interpretation of source]} Cafe Borrone, adjacent to Keplers Bookstore in the Menlo Center, is a popular lunch spot in downtown Menlo Park. ...

Another issue caused by real-estate flipping is the influx of poorly remodeled homes on the market. Since more and more inexperienced people are becoming remodelers, the after product tends to be poorly or incorrectly done.^{[citation needed]}

Positive effects of real estate flipping

Although most arguments surrounding flipping tend to be negative, it is also possible to identify some benefits from the practice as well.

For example, "rational" flipping can encourage a rejuvenation and restoration of a previously decrepit neighborhood. (Under the broken windows theory, an unkept house/area attracts a criminal element, which drives out those making a responsible living, which allows for more criminal element, and so on in a vicious downward cycle.) The restoration creates jobs, particularly in construction, for locals and generates more sales (and sales taxes) to local vendors (initially those involved in selling construction materials). The newly remodelled homes will then attract new populations and businesses to a region, encouraging more economic development, plus the remodelled homes' higher assessed values brings more property tax revenues to local governments, allowing for more improvements to the area and driving out the criminal element. Fixing Broken Windows: Restoring Order and Reducing Crime in Our Communities by George L. Kelling and Catherine Coles is a sociology book about petty urban crime and strategies to contain it. ... Property tax, millage tax is an ad valorem tax that an owner of real estate or other property pays on the value of the property being taxed. ...

Even on a single home basis, flipping can have positive impacts (the house itself will be in better condition and last longer, and can be sold at a higher price, thus increasing its property tax assessed value, plus increased sales for goods and services related to property improvement and the related increase in sales taxes).

Regulation of real estate flipping

As of July 7, 2006, the Department of Housing and Urban Development created regulations regarding predatory flipping within Federal Housing Authority (FHA) single-family mortgage insurance. The time requirement for owning a property is greater than 90 days between purchase and sale dates to qualify for FHA-insured mortgage financing.^[4] is the 188th day of the year (189th in leap years) in the Gregorian calendar. ... Year 2006 (MMVI) was a common year starting on Sunday (link displays full 2006 calendar) of the Gregorian calendar. ...

In 2007, the Federal National Mortgage Association released regulations regarding "flipping" properties in a fraudulent manner. The Federal National Mortgage Association (FNMA) (NYSE: FNM), commonly known as Fannie Mae, is a government sponsored enterprise (GSE) sponsored by the United States government. ...

Criminal real estate flipping

Flipping may also be a criminal scheme. Illegal property flipping is a fraud for profit scheme whereby recently acquired real property is resold for a considerable profit with an artificially inflated value. The real property is resold within a short time frame, often after making only cosmetic improvements to the real property. Illegal property flipping often involves collusion between a real estate appraiser, a mortgage originator and a closing agent. The cooperation of a real estate appraiser is necessary since a false and artificially inflated appraisal report is required. The buyer (ultimate borrower) may or may not be aware of the situation. This type of fraud is one of the most costly for lenders because the loss is always large.

The following is an example of an illegal property flip: A buyer contracts to purchase a property in his name for $30,000. Before closing the deal, he draws up a second contract to sell the property to a co-conspirator at $70,000 — a price substantially higher than market value. He seeks a loan for a second contract through a mortgage lender or a mortgage broker and submits an application. A real estate appraiser inflates the value of the property, enough to justify the loan, and is paid triple the usual fee. (although many times inexperienced or incompetent appraisers are unwittingly caught in the scheme through pressure and intimidation from the scammers) A mortgage lender approves the application and releases the $70,000. Next, the contracts for the property are closed either simultaneously or within a short time from each other. The originator of the scheme takes the $70,000, pays off the $30,000 and divides the remaining $40,000 between himself and any other plotters — usually the mortgage broker or loan officer and sometimes the second buyer. The lender ends up with a 100% or greater loan to value mortgage. That buyer makes a few payments on the property, then defaults and allows it to go into foreclosure. Finally, the lender learns that the property doesn’t even cover the loan value.

In the United States, the Uniform Standards of Professional Appraisal Practice (USPAP), which governs real estate appraisal, and Fannie Mae, which oversees the secondary residential mortgage market, have enacted practices to detect illegal flipping schemes. Uniform Standards of Professional Appraisal Practice can be thought of as the quality control standards applicable for appraisal analysis and reports in the U.S. and its territories. ... A real estate appraisal is a service performed, by an appraiser, that develops an opinion of value based upon the highest and best use of real property. ... The federal government of the United States created the Federal National Mortgage Association (FNMA) (NYSE: FNM), commonly known as Fannie Mae, in 1938 to establish a secondary market for mortgages insured by the Federal Housing Administration (FHA). ... This article does not cite any references or sources. ...

Real estate flipping in the media

Television shows

• Discovery Home Channel's "Double Agents"
• Bravo's "Million Dollar Listing: Hollywood", "a six-episode original series chronicling the high-stakes, cutthroat world of real estate in a thriving market."
• Bravo's "Flipping Out, a 2007 series.
• Fine Living to release a show in 2006 on "the anatomy of the real-estate deal".
• TLC's "The Adam Carolla Project" in which the host of Comedy Central's "Too Late With Adam Carolla" (a former carpenter) "guts his childhood home with the goal of flipping it for more than $1 million."
• TLC and BBC's "Property Ladder"
• A&E Network's "Flip This House"
• TLC's "Flip That House" (not to be confused with A&E's "Flip This House")
• TLC's "Flip It Fast"
• TLC's "The Real Estate Pros"
• HGTV's "The Big Flip"

News media

• Mann, Ted. "Risky Business", Scarsdale Magazine, September 30, 2006.  -- about real-estate flippers in suburban New York.

This article is about the U.S. cable network. ... This article is about the U.S. cable network. ... Flipping Out is a reality television series on Bravo. ... Fine Living is an American speciality television channel dedicated to programs about lifestyle, but not just lifestyle programs, programs that help viewers pursue their passions, realize their dreams and maximize their precious time. ... Year 2006 (MMVI) was a common year starting on Sunday (link displays full 2006 calendar) of the Gregorian calendar. ... TLC is a cable TV network in the US and Canada, that carries a variety of informational and reality-based programming. ... The Adam Carolla Project, which airs Tuesday nights at 10 p. ... Comedy Central is an American cable television and satellite television channel in the United States. ... Too Late with Adam Carolla is a late night show hosted by Adam Carolla and produced by Jackhole Industries, a team made up of old collaborators Carolla, Jimmy Kimmel, and Daniel Kellison. ... TLC is a cable TV network in the US and Canada, that carries a variety of informational and reality-based programming. ... Property Ladder is the name of a television show that airs in both the U.K. and the U.S., where first-time investors engaged in flipping purchase older houses (usually in need of repair) and attempt to sell them for a profit. ... Biography is one of A&Es longest-running and most popular programs. ... Flip This House is a television series which airs on the A&E (Arts and Entertainment) television network. ... TLC is a cable TV network in the US and Canada, that carries a variety of informational and reality-based programming. ... Flip That House is an anthology series created by the Discovery Channel and sometimes broadcast on The Learning Channel. ... Biography is one of A&Es longest-running and most popular programs. ... Flip This House is a television series which airs on the A&E (Arts and Entertainment) television network. ... TLC is a cable TV network in the US and Canada, that carries a variety of informational and reality-based programming. ... TLC is a cable TV network in the US and Canada, that carries a variety of informational and reality-based programming. ... The Real Estate Pros (originally titled The Real Deal) is a television series which airs on the TLC network. ... HGTV Canada, which stands for Home & Garden Television is a Canadian cable television specialty channel owned and operated by Alliance Atlantis Communications (80. ... Scarsdale Magazine is a regional lifestyle magazine that covers the village of Scarsdale, New York and its surrounding area (Hartsdale, Eastchester, Edgemont, Greenburgh, Tuckahoe, etc. ... is the 273rd day of the year (274th in leap years) in the Gregorian calendar. ... Year 2006 (MMVI) was a common year starting on Sunday (link displays full 2006 calendar) of the Gregorian calendar. ...

See also

• Housing bubble
• United States housing bubble

The current US property bubble is the United States economic bubble in real estate following the stock market bubble in the 1990s called, among other things, the dot-com bubble. ... Home $weet Home: cover of the June 13, 2005 issue of Time Magazine. ...

References