Question:

What is property flipping?

Response:

The phrase “property flipping” or “a flip” is commonly used to describe the transfer of property where fraud is used to obtain inflated prices and loans.

It is important to note that “property flipping” is distinctly different from the usual activity of buying and selling property at a profit. The market for real estate is imperfect. Knowledgeable and honest parties seek opportunities to acquire a given property at a favorable price with the objective of reselling that property at a profit. Such activity does not constitute flipping as there is no intent to mislead or defraud.

USPAP does not describe property flipping itself, but it does prohibit appraisers from communicating assignment results in a fraudulent or misleading manner. The ETHICS RULE is explicit about any kind of activity designed to mislead or defraud, as specified in the Conduct section of the ETHICS RULE:

An appraiser must perform assignments ethically and competently, in accordance with USPAP

An appraiser must not engage in criminal conduct.

An appraiser must not communicate assignment results in a misleading or fraudulent manner.

An appraiser must not use or communicate a misleading or fraudulent report or knowingly permit an employee or other person to communicate a misleading or fraudulent report.