A flopper drives down the price of your home so that the lender will allow the borrower to sell your home for less than it's worth. "You have to have an appraiser involved for this [scam] to be successful," says Griff Straw, president of Solidifi. Straw does not think "flopping" can be successful without an appraiser who's willing to undervalue the property.
Once the flopper gets an agreement for the short sale he then finds a buyer (or may already have a buyer lined up) who will buy the property for thousands of dollars more. The lender takes the loss -- and possibly even the homeowner who agreed to the short sale, if there wasn't a protection against being sued by the lender for a deficiency judgment.
You could be left holding the bag for thousands of dollars if the short sale isn't handled in a way that protects you from getting hit with a deficiency judgment. (That's when the bank chases you for any shortfall.) You can be protected with a short-sale contract, but you need to work with a reputable real estate lawyer when you negotiate with the bank. So if someone approaches you with a quick deal to get out of your house, be cautious.
After you contact your lender, the next call should be to a HUD counselor. He or she can make sure that you get a fair deal from the lender and also help you find alternatives -- either through a modification, a short sale, or a deed in lieu of foreclosure. A HUD counselor is not only familiar with programs offered by your lender, but also by other lenders and the FHA. So don't try to sort through your options alone or take help from a stranger who knocks on your door, sends an attractive post card or posts a sign on your corner.
Straw says, "if a deal sounds too good to be true, it is." Most people who get caught up in "flopping" scams or other types of real estate fraud usually do so because they did not seek competent help. He also highly recommends that you work out any deal with the help of a competent real estate attorney. If you don't know one, use the Lawyer Locator at the American Bar Association. You can search for a lawyer by areas of practice.
In the past, fraud was concentrated in several unique locations, such as Miami-Dade or Broward County, Fla., but today Straw sees cases of fraud in all 50 states. You can learn more about the types of mortgage fraud at Freddie Mac's website.
If you're facing financial difficulty, don't try to solve it on your own. Seek help from your lender and from a HUD counselor. The last place you want to seek help is by calling someone you don't know based on a sign you see on the road or a postcard you get in the mail.
Lita Epstein has written more than 25 books including "The 250 Questions You Should Ask to Avoid Foreclosure" and "The Complete Idiot's Guide to Personal Bankruptcy."
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