 First-Time Homebuyer Scams:
Property Flipping and One-Stop Shops
“Property flipping” is when a real estate speculator buys a property at a discount, performs cosmetic repairs, and then sells the home at a fraudulent price to a new homebuyer. New homeowners find themselves trapped in expensive mortgages, and stuck with properties in terrible condition that they cannot even sell.
If you are a first-time home purchaser, you should be aware of this scam and learn how to avoid it. If you believe that you have fallen victim to a property flipping scheme, there may be resources available to help you.
Many dishonest real estate sellers take advantage of new homebuyers by advertising as “one-stop shops” that arrange all aspects of the home purchase on behalf of the buyer. These realtors promise to “take care of everything” for the buyers, including showing available properties, fully renovating the homes, arranging the appraisal and inspection, helping buyers apply for and obtain a mortgage, and even providing an attorney to represent the buyers.
Tips if you are shopping for a mortgage loan:
- Avoid lenders that advertise "No credit? Bad credit? No problem!"
- Avoid companies that offer to arrange everything - the property, lender, appraiser, inspector, attorney, etc.
- Shop around and compare loan offers from different banks and mortgage companies.
- Always hire your own attorney to represent you at closing.
For a pdf version of this tip sheet, click here. For more information on resources for first-time homebuyers, including homebuying workshops provided by community organizations, click here. |
