Investing in Real Estate - Shadow Flipping.
Shadow flipping has been in the news lately and the story got silenced fairly quickly yet no one ever explained what shadow flipping was.
So why don’t I explain it for anyone who is interested. Shadow flipping is simply buying a house for well below market value and then turning around and selling it for market value or above market value and keeping the profits for yourself.
Investing in real estate is similar to investing in the stock market except in the stock market anyone and everyone is allowed to know the buy price of a stock and the sell price of a stock.
In real estate some places get placed on a listing service, get a lawn sign placed in the front yard and allow everyone to see the price that it is selling for yet when it is sold NOT everyone gets to know the price that it sold for.
A house can always be purchased for different prices depending on who is selling the house and who is buying the house.
So how can someone get into shadow flipping and how can they make money at it.
Step 1 Look for someone who is wanting to sell their house yet the house should not be under contract. Simply put, it is not on the market and there is no lawn sign saying that it is for sale. Here you are looking for someone who is wanting to sell in the near future. More specifically they have been living in the house for a long time and are maybe wanting to downsize or even get out of the housing market.
When you find this person who is wanting to sell in the near future you’ll need to make them an offer to purchase and you’ll need to try and get the house or property for below or well below market value. You’ll want to keep the deal quiet and you’ll want to close the deal without anyone else ever knowing. Buying low is the key to setting up to make a profit.
Step 2 Once you own the place and have purchased it for well below market value you will then have some choices. Keep it and let it appreciate while maybe renting it out to cover expenses, raise the price and sell it on the public market using platforms like http://istockhomes.com or other listing services or fix it up and sell it for a profit.
Shadow flipping is more about insider trading and not allowing other people the chance to make an offer and bid up the price of the house.
Where I get upset with shadow flipping is when some unsuspecting older person calls in a professional to sell their house and the professional finds them a buyer and gets the house sold for at time as much as $100,000.00 dollars or more below market value then flips it and walks away with the profit.
If you are wanting to protect yourself against shadow flipping practices there are a few things that you can do.
First if considering hiring a professional sales person make sure you meet at least 3 of them and have all three give you a suggested listing price in writing and do NOT sign a contract to list with the first professional sales person that comes through your door. Their sales tactics can be very high pressure and some will insist on you listing with them and signing right now or else.
Second have a friend or family member that you trust with you when interviewing any professional salesperson when deciding on who to list your place with always go with your gut instinct and not the suggested list price on the bottom of the contract.
Once listed and offers start to come in never accept the first offer without allowing time for other offers to come in and make sure you look to make sure your listing is available to the general public. You can even request to have it listed on http://istockhomes.com along with other classifieds sites.
If you are wanting to sell a house on your own without the help of a “Professional” come and check out the tutorials we have at http://istockhomes.com/our-book Then add your listing to the site.
Lastly never feel pressured to sell if something does not feel right.
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