Beware of Short Sale Flopping: How to Spot and Avoid This Real Estate Scam

Beware of Short Sale Flopping: How to Spot and Avoid This Real Estate Scam

Buying or selling a home can be stressful, especially when dealing with a short sale. A short sale happens when a homeowner sells their house for less than they owe on the mortgage, often to avoid foreclosure. While short sales can be a good deal for buyers and help struggling homeowners, some people take advantage of the system through a scam called short sale flopping.

What is Short Sale Flopping?

Short sale flopping is when a home is sold for a very low price in a short sale, but the real value is much higher. Scammers work together to trick the bank into thinking the home is worth less than it actually is. Then, once the bank approves the sale, the scammers quickly resell the home at a much higher price for a big profit.

This scheme often involves dishonest real estate agents, appraisers, or investors who work together to manipulate the sale. The bank loses money, and sometimes the original homeowner gets stuck with extra debt or legal trouble.

Red Flags of Short Sale Flopping

Whether you’re buying or selling a home, watch for these warning signs of a short sale scam:

1. Suspiciously Low Sale Price – If the home sells for way less than similar homes in the area, it could be a sign that someone is manipulating the price.
2. Fake or Biased Appraisal – If an appraiser undervalues a home, it might be part of a scheme to trick the bank. Always check multiple sources for a home’s value.
3. Same-Day or Next-Day Resale – If a home is sold again within days or weeks at a much higher price, it could mean the first sale was a scam.
4. Undisclosed Conflicts of Interest – If the buyer, seller, and real estate agent all seem connected or have relationships that aren’t fully disclosed, something could be wrong.
5. Limited Marketing or Hidden Listings – If a home isn’t widely advertised and sells quickly to an insider, it could be a scheme to keep honest buyers away.

What to Do if You Fall Victim to a Short Sale Scam

If you suspect a short sale scam, don’t ignore it. Here’s what you can do:

• Report It – Contact the bank involved in the short sale and let them know you suspect fraud. Contact your states real estate board to report the agent. You can also report it to local law enforcement or the FBI.
• Get Legal Help – A real estate attorney can help you understand your rights and what steps to take next.
• Gather Evidence – Keep records of emails, documents, and conversations related to the sale. The more proof you have, the easier it is to report fraud.
• Contact a Trusted REALTOR® – If you’re unsure about a deal, a trustworthy real estate agent can help you check if something seems off.

Short sale flopping hurts everyone—homeowners, buyers, and banks. If you’re buying or selling a short-sale home, always work with a professional you trust. If you need guidance, reach out to Karen Holmes, REALTOR® at 580-210-0075 to make sure your real estate transactions are honest and safe.