I Love Flips

There's a dirty four-letter word in the mortgage industry that sends underwriters appraisers, home inspectors, title companies and everyone else running scared. But I love it. That word is FLIP. What did you think it was?

The old connotation of a "Flip" was a smooth talking scam artist that bought a property cheaply, and sold it as an inflated price to a sucker (buyer) who may or may not have known what was really going on. The appraiser & title company were often paid kickbacks to look the other way. These buyers often walked quickly away from the property after getting some payoff money from the seller and the mortgage company & the PMI company was left with a property (with a bogus appraisal) that was worth far less than what they loaned the borrower. In the mid 90s this type of scam brought many companies under and cost the mortgage industry probably billions of dollars. Because of the title changing hands so quickly and the inaccuracy of appraisals in when real estate values are changing quickly, there is a much higher possibility of fraud on "Flips"

Then there's the pre-payment, which is an entirely different issue. When a lender originates a loan (whether it be wholesale through a broker, retail, etc) it costs them a lot of money. They have to pay underwriters, closers, processors, loan officers, etc. Unlike a broker, the bulk of their money is not made by points or yield spread, but it's made on the interest that the borrower pays them back. If a loan pays off in a couple of months. The lender loses money.

Lenders are so nervous about the possible fraud & pre-payment that they shy away from investors who can buy a property and sell it quickly making themselves a profit. In my humble opinion, if an investor can find this type of deal legitimately, and I can't stress the word legitimately enough, G-d bless him. Maybe I'm brave. Maybe I'm crazy, but I believe turning a profit on real estate is the American way. And when investors find this type of deal, that's where I come in.

There are companies (including mine) who will:

" Base all LTV's off of appraised value. Not purchase price (anyone can pay market price for a property. A true investor knows how to get it at a discount)
" No limitation on seller 2nd mortgages
" No limitation on seller paid closing costs
" No limitation on property seasoning
" No pre-payment penalty (I don't care how quickly they pay me off)
" Properties in any condition (I lend fix up costs)
" Any type of property
" If they're buying it right. NO DOWN PAYMENT NEEDED

You find an investor with a legitimate good deal on a property and I'm interested in doing the financing. Call my office and ask about flips. I'll tell you that "I love them"

Ari Miller has been with Gelt Financial Corporation, Southampton, PA, since 1993.

Since 1998, Rehab. Loans have been one of our specialties.

Published in The Mortgage Press in June 2005

Contact Information: Ari Miller; Gelt Financial Corporation; 800-355-4358, ext. 275 or AriM@GeltFinancial.com