Everyone has heard about house flipping. There is even a reality show called flip that house. A lot of news headlines and real estate people talk about illegal house flipping. But if this process is illegal, then how is everyone doing it and talking about how to do it?

The fact of the matter is that house flipping is not illegal if it is done properly and ethically. Anyone who has ever bought real estate for a primary home and then sold it for a profit later has successfully flipped a house. That is the basic idea behind house flipping. The real estate investment is purchased, and then resold later for a higher price. The length of ownership time may be months or decades, and that does not matter for this purpose. Sometimes this may involve renovating or repairing the real estate before selling it, to increase the value of the investment.

What everyone has been calling illegal house flipping is actually real estate fraud. These cases generally involve people who have lied or misled about significant facts to wrongly inflate the value of the real estate investment. This includes payments or bribes to get the property appraised at a value higher than what the real estate is actually worth, falsifying down payments or any other information like tax receipts and check stubs to get a loan that is not qualified for, and more. One type of real estate fraud is lying or covering up obvious or serious problems with the house to lenders, as well as to buyers who are not sophisticated. Another fraud type is to back date any documents that are needed for the loan, such as lease agreements, to give the impression of a longer length of time.

Unfortunately, the news media has confused house flipping with the types of fraud mentioned above. Many escrow and title companies refuse to do double closings, and many lenders have something that is called seasoning requirements on the ownership by the seller. This generally means that if you have not owned the real estate investment for at least half a year most lenders will assume there is something funny. This means that these lenders will not loan to a buyer who is trying to buy your house under these circumstances.

Flipping houses is not illegal as long as there are no misleading or fraudulent statements made or signed. If you are investing in real estate, make sure that you read all the paperwork and contracts very closely. The contract is the statement of facts that you are providing to the lender. This contract should not contain any deceptions or false statements. This process only becomes illegal when fraud is committed, usually in the form of deceptive or misleading statements made in the lending contract. As long as you act honestly and ethically, there is nothing illegal about making money by doing honest business.

Copyright © 2007 Joel Teo. All rights reserved. (You may publish this article in its entirety with the following author's information with live links only.)

Successfully flipping houses means that you should be aware of the mistakes that you may tend to make. There are certain rules that you need to keep in mind in order to avoid getting entangled in these mistakes.

It is a bad idea to fall in love with the house. You have to remember that it is just a house made up of mortar, clay, bricks and wood. There are several more houses and you cannot afford to fall in love with each house that you see. If you are the kind of person who gets emotionally attached to homes then flipping houses is just not meant for you. Never forget that at the end of the day it is just business and keep it that way.

You need to keep your mouth shut. Do not reveal what deals you have made unless the contract or associated papers have been signed.The first impressions are always the most important.It is an extremely good idea to spend the most amount of money on the exterior and the landscaping in front of the house. It is the first impression that matters. It is the first 5 seconds that is the crucial time in which prospective buyers decide or make up their mind.

If the exteriors are not up to par, prospective buyers will lose interest even before they view the house from the inside. Shiny and clean door knobs, coach lamps, door knockers and nicely done up address numbers will add to the impression. In fact if certain extra features do not gel cosmetically with the house then those should be removed at once.

It is not a good idea to go overboard. Flipping houses can bring in a decent profit by simple acts of replacing the paint, cleaning the house or getting a new carpet. A lot of flippers think that they need to invest thousands of dollars on a house to make it sell. This is the prime reason why complete renovation and remodeling of a house takes place. It also means that the price tag of the house goes higher in order to cover the amount spend on renovating it.

Ultimately, the investor has to drop the price because the house ends up sitting in the market for too long a period. What you must remember while flipping houses is that you are not fighting for a spot on the cover of a real estate magazine but only trying to make some profit.

Do not be greedy. Take the first offer that comes along if you have priced your home well. Do not be greedy and wait for months to get a better deal. At the end you might lose out on all prospective buyers and will have to eventually cut down your price. So greediness will not bring in profits but instead lead you to incur losses.

The above mentioned rules for flipping houses will help you in avoiding common mistakes.