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Making properties look unattractive is part of a new scam called "flopping." This image shows a bank-owned property with uncleared debris around the house. (City of Auburn Photo/file)

Scammers taking a 'flop' to lowball buyers, lenders

BY Tom Kelly  on October 24, 2012 @ 8:08 am (Updated: 10:59 am - 10/24/12 )

The latest mortgage fraud scam known as "flopping" has sellers who actually make their home look undesirable so that they can attract low offers from buyers.

Here's how it works: The seller is underwater on their mortgage and wants to get the lender to agree to a short sale. The seller, working with an accomplice, seeks to get a super low price to sell their home in the short sale by making bogus damage claims. Once they get the bank to agree to a short sale, the home is sold to an accomplice who then quickly cleans up the home and resells it for a profit.

"Floppers," as they're known, average a $55,000 profit from the quick flips.

To get the low home price, some sellers will go to great lengths to make their homes look undesirable, even spreading possum urine around the house or turning up the heat and closing all the windows for several days, says Ann Fulmer, a mortgage fraud specialist with Interthinx.

Floppers also have been known to remove appliances and cupboard doors and even paint the ceilings so it looks like there's been water damage in the home. When no sellers want the home due to the flaws, the sellers will point out to the bank the problems with the home and why the sales price needs to be lowered.

Some scammers have even claimed their homes were contaminated as crystal meth labs in order to get a lower price.

Freddie Mac is cracking down on floppers, investigating suspicious cases, and has opened up a toll free number for others to report suspicious activity: 1-800-4fraud8.

Tom Kelly, Real Estate Today
Tom Kelly has been a professional journalist for 36 years. He served The Seattle Times for 20 years, many as Real Estate Editor.
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Comments (13)


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  • ZebraWii wrote...
    Scamming the banks?
    October 24, 2012 11:56 am
    Gee, that would be WRONG! It's not like the banks would ever take advantage of us ... is it?
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • 2112 wrote...
    yeah
    October 24, 2012 1:53 pm
    Banks are not the most deserving of sympathy.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Paul Kersey wrote...
    Yet somehow I get the feeling
    October 24, 2012 1:59 pm
    that it is taxpayers and responsible neighbors who end up as the ones who pay the price, not the banks.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • ron prevost wrote...
    You reference Freddy Mac 'cracking down'.
    October 24, 2012 3:08 pm
    But FNMA and FHA already have programs for pre-foreclosure appraisals and home inspections. I would really hope FHLMC does also. Except I know they are so stupidly penny wise that they pay below market for the appraisals & inspections.

    In the end, it IS the lender's responsibility not to get cheated. The problem is, though, that too many lenders just don't care.

    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • John wrote...
    Who made that homeowner take out that mortgage from that meany ol' bank
    October 24, 2012 5:33 pm
    Grow up people. People got mortgages who should NEVER had one in the first place. Now it is someone else's fault because they put their signature on a line. Now, it is OK to commit fraud simply because that meany ol' big bank who gave you a loan in the first place, and you never made payments, now all of sudden the bank should take the fall. Hope you land in jail.
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  • SickofSeattleite wrote...
    @john
    October 25, 2012 5:46 am
    Who MADE the meany ol'banks give them the loans in the first place? THE GOVERNMENT!!! Just another example of the Government meddling in things they have no business meddling with. Obamacare would be another example of a soon to be monstrosity.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Hayduke wrote...
    John do you think people should be expected to understand everything about how their car works before they bring it to the mechanic?
    October 24, 2012 8:01 pm
    Or understand the complexities of human physiology before having surgery?

    NO? Then why would you expect the average citizen, especially little old ladies, to be savvy enough to understand what a professional con-artist (sorry, "mortgage broker") tells them?

    Those docs are an inch thick with so much small print and legalize, you really expect people to understand all that?

    The banks and lenders sure do, because that's their JOB. And they had no problem artificially inflating appraisals, working hand in hand with the appraisers. Countrywide, WAMU, you name it, they had They had no problem pushing NINJA loans. And push they did.

    And why not? They just break up the mortgage and sell it off to another interest. Then, if the buyer defaults, it's no longer their problem.

    The banks defrauded the American people for years. I don't see you calling for any of THEM to go to jail.

    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Realitycheck wrote...
    Bravo Hayduke and boo John
    October 24, 2012 9:32 pm
    You are dead on. And John, don't even start with buyers that can't afford the loan. The banks inflated the market by given out mortgages left and right to people that couldn't afford it and in the process they collapsed the whole industry and economy. They made money giving the loans and made money foreclosing on people, plus defrauding investors as well by packing up these toxic loans and selling them. Banks defrauded this country for years. They deserve everything they have coming their way and then some. In fact I tell everybody I can to ditch their bank and switch to a credit union. Stop the whole scam banks are once and for all.
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  • O-town listener wrote...
    Hayduke and realitycheck..
    October 24, 2012 11:56 pm
    When someone goes in for surgery there generally isn't much of an option - they know they are sick and they know they need this to get better. Often, when someone goes in to a mechanic it is the same way - they know they need their car and it is not working so they get it fixed. Neither is really an appropriate analogy.

    Alternatively, if you had a friend who mas making $14 bucks an hour at a job and he showed up tomorrow at your house to show off the brand new Lexus he just bought, wouldn't you think him somewhat of an idiot for getting in over his head?

    Again, for your analogies of surgery and auto repair - no, I'm not expecting them to know everything about the body or cars, but I'm definately expecting them to know if they can afford the $700 mechanic bill they are quoted, or understand the cost of surgery and have a sense how to pay for it (although again, in the surgery analogy, if they have to have it I'm less inclined to blame them for not being able to pay for it - it is a necessity for staying alive).

    But the simple fact is not everyone had to buy a home. I was employed during the entire housing boom - had lots of people telling me I should buy a house - knew I didn't want to get myself on the hook for $300k,$400k, etc. until I had almost every other bill paid off save my student loans and enough savings to pay at least 3 months worth of bills so I kept renting. Still working on it, getting close.. I got the letters in the mail constantly though - buy a home, pre-approved, etc. - I never followed up.

    People got greedy and bought way more house than they needed in most cases. That is on them. Did the banks help? sure they did - they are a business, that is what they do - sell stuff. But they didn't do anything more than the person who sells you a bigger T.V. than you need on a store credit card with 29% interest, or a car with more features than you need, or a computer with more processing power than you need, or anything else. We are slammed with marketers every day - people who get greedy and jump into it need to own their own decisions.

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  • SickofSeattleite wrote...
    eye
    October 25, 2012 5:40 am
    for an eye
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • SickofSeattleite wrote...
    the mortgage company we used to get screwed with
    October 25, 2012 5:51 am
    lost their license due to bad practices and fraud... i am still stuck with a house underwater over 120,000 and the neighborhood is deteriorating...I can see 5 vacant houses from my front yard and Obama and the media tell me things are better? In what delusional world? An imaginary one? How is this my fault? Not to mention my work hours being cut because my employer is being crushed under all these new laws and taxes that are in effect and about to be in effect...square footage tax? Penalty tax because your employers don't use public transportation? Really?
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Velix wrote...
    Short sellers are not always victims
    October 26, 2012 12:20 pm
    What people forget is that many of these short sales are due to the seller sucking all the equity out and spending it. So even though they are selling short or allowing the home to fall to foreclosure, the seller may have used the money to buy a car, a trip or even to pay for college tuition. They're not all people who got caught up buying at the wrong time. Quite frankly, it's not too bad to walk away without owing on all those things.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Raining Sideways wrote...
    Possum Urine???
    October 28, 2012 11:41 pm
    I can see cat or dog urine..but how does one collect Possum Urine to spread around their house? LOL
    { "Thumbs Up":"1","Thumbs Down":"-1" }
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