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.)

Joseph Lane asked:

People will agree and disagree allot about when the real estate market will recover completely from the current high rate of foreclosure predictions for the next 2-3 years. Many may shy away from the market simply because they don’t want to get to involved with the market if it doesn’t look promising. The real estate market is always shifting different ways, Currently, due to some loans that were approved a few years back, many of those loans were acquired with payments that could change in the future and many of them did and the house owner could no longer afford the new payment and then many slipped into foreclosure.

With all the houses that are returning to the marketplace, there could be many opportunities to flip a house. Sure, many deals will still lack attraction but with the sheer volume of real estate property deals on the market, it will be a buyers market and for the agents who research enough, their will be some good house flip prospects. A Real Estate coach is recommended if you need help. For those unfamiliar with the term "Flip This House", it is a show on the A&E channel hosted by Armando Montelongo. The show has taught and introduced many people into the realm of buying and selling houses; known as 'flipping houses'.

With the market being flooded with properties, house flippers should start their engines because its a good time to buy and sell properties if you plan well in advance and your financial planning includes backup paths to selling the property. Montelongo House Flip style real estate is a popular way to get involved with the buying and selling of properties for quick profit.

In 2008 to 2010, it will be an era where a person will need to really have a good plan upfront so to address and situation that may arise after they buy the property. Even though the market is not great now, it is still a viable time to make money on the market if you do your homework. Remember, get a Real Estate coach is recommended if you need help. Information, experience and guidance are priceless assistance available to you.