Flipping, Flopping and Fraud

Flipping, flopping, fraud….today there is more and more misinformation and disinformation in real estate. I had an agent from back East contact me with concern about a particular deal and that it may be illegal. I hear this EVERY day now and 95% of the time, the deal is not even remotely fraud. This particular case is one in which the BANK’s appraiser came back with a low figure. The bank hired the appraiser and neither the buyer or seller ever met the appraiser. The low appraisal gave the buyer a great deal. How is this fraud?
The agent directed me to a CoreLogic study. According to a study by CoreLogic, a mortgage and real-estate data research company, short-sale fraud, or flopping, is an emerging financial crime. Lenders will lose more than $375 million this year alone when they sell undervalued houses to unscrupulous realty agents and their cohorts, the company says. In its study of the issue, CoreLogic labeled as suspicious two-thirds of short-sales that are resold within six months at a profit of 40% or more. How can they make this assumption?? It is fraud because of the amount of profit?? Or is it fraud because the property was sold within six months?? This is arbitrary and random and there are no facts to support this “study”. I tend to agree with CoreLogic on a lot of things, but they are way off base here.
Yes, 40% profit is a lot. Perhaps some of these investors added value to the property. Just negotiating a short sale and getting it approved adds value since 30% of buyers will not look at short sale properties (according to NAR). Perhaps an investor takes advantage of a seasonal swing in values - Buys during the low season and sells during the high season.
Such blanket allegations of fraud are hurting the industry and the reputations of many legitimate agents, brokers and buyers. It is difficult (and in many cases ignorant) to assume that based on arbitrary number of days that an investor holds a property or an equally arbitrary percentage of profit that fraud has been committed.