A land flip is a type of scam involving the sale of property at a price that is far higher than its real market value. Several people get together and sell and resell the same property to each other at increasing prices. Finally, they dispose of the property to an unsuspecting buyer at a highly inflated price.
What does land flip mean?
The value of a particular plot of land can be difficult to determine. Prices are influenced by factors such as the permitted use of the land, proximity to a highway, and the development plans for nearby areas. Changes in government policies or the launch of a new project or a road that is to be constructed nearby could result in land prices shooting up overnight.
As real estate prices can vary widely between different locations, buyers often have to rely on their judgment to make a purchasing decision. One piece of information that many buyers rely on is the price at which the land was last sold. Fraudsters take advantage of this to fool buyers.
A group of people could sell and resell a piece of land to each other at inflated values. They could then sell the land to their victim at a price that is much more than the land is worth. The buyer left holding the land would suffer a significant loss when he sells the property.
Example of a land flip
A group of five people decides to carry out a land flip. The first person, A, buys a property at $100,000. He sells it to the second person, B, for $125,000. In a similar manner, B sells to C, who in turn, sells to D. D then sells the property to E. The fifth buyer, E, buys the property at $200,000.
These are not genuine transactions. A, B, C, D, and E have conspired to inflate the price of the property. They find a buyer, F, who falls into their trap, and buys the property for $210,000. A year later, when he decides to sell the property, he realizes that it is worth only $100,000. When F carries out a detailed investigation, he gets to know that he is a victim of a land flip.
A land flip is a fraudulent real estate transaction involving the sale and resale of property at inflated values. At the final stage of the land flip, the real estate is sold to the victim at a price that is far higher than the fair market value.