Seminars are being held in the New York Metro area that claim to show how the average consumer can learn to successfully buy and quickly resell or “flip” houses to build long-term wealth. The BBB has seen exaggerated claims stating that consumers can learn the process if they are “motivated” and spend just a little time learning from the seminar leaders.
“People can fall victim to their own wishful thinking,” said Claire Rosenzweig, President and CEO of the BBB Serving Metro New York. “These companies want you to think that anyone can succeed at flipping houses, and they say you can use other people’s money. But it can take a long time to get the skills and resources needed to achieve success in this business, and providing your own financing is often necessary. House flipping is a very risky investment and only those individuals who can afford to take a significant risk should consider engaging in this activity.”
Consumers who are considering attending a house flipping seminar should keep in mind the following cautions:
· You will not learn everything you need to know at the initial seminar. While that event may be free, it is probably a sales pitch for more extensive programs that can cost thousands of dollars.
· Don’t fall victim to high-pressure sales tactics. Take the time to research the opportunity carefully and don’t sign a contract until you fully understand all of the terms.
· Check out the refund policy and be sure to get all promises in writing.
· Many fixer-upper or foreclosed homes on the market have been empty for long periods of time or may have been vandalized, which will make for costly repairs and will make the homes difficult to “flip” quickly. If you don’t have enough financial resources to hold onto the property for as long as it takes to sell it – this business is not for you.
· If you purchase a home with violations, you could face fines or criminal penalties if you fail to fix them or cannot afford the needed repairs.
· If you plan on financing the purchase of a house, be sure to budget for the appraisal, filing fees, insurance, taxes and maintenance of the house until it is sold.
· Beware of becoming a “straw buyer,” a person who makes a purchase on behalf of another person. The real buyer promises to make all the payments and may compensate the straw buyer for the use of his or her credit. This activity is very risky for straw buyers, who may be held legally responsible for the debt they incurred on behalf of others; this can ruin a person’s credit and possibly even involve an unknowing straw buyer in a criminal scam.
· Watch out for house flipping “rings” or “one-stop shops” of mortgage brokers, lenders, appraisers, home inspectors, closing agents, and attorneys. These groups try to convince home buyers that they can help with all the details of the home purchase, but because they are working together, there isn’t anybody protecting the home buyer’s interests. In particular, be wary of unscrupulous home appraisers who may fraudulent inflate the value of a property in an appraisal as part of a house flipping scam.
· Check out a company with the BBB before doing business. Be sure to check out a company’s BBB Business Review, rating and complaint history. BBB Business Reviews can be found at www.newyork.bbb.org.
