Michael Garcia, the U.S. Attorney for the Southern District of New York, announced the indictment of Wilson James Baston, Jr., also known as Will James, by a Federal Grand Jury in Manhattan last week. The Indictment alleges that, over the past five years, Baston defrauded victims out of millions of dollars through Will James Equity Partners, Inc., which claimed to be a real estate investment program which purchased distressed properties in the New York City area as investment vehicles for long and short-term investors.

According to the indictment, from 2002 until earlier this year, Baston recruited over 70 investors through false promises of guaranteed short-term, high rates of return on investments in distressed properties, with additional guarantees on the principal investment. Baston recruited investors in Will James Equity Partners, through a variety of means including word-of-mouth referrals, classified advertisements in the New York Times, and promotional literature. According to one promotional brochure, Will James Equity Partners, purchased so-called “pre-foreclosure” property using funds from “a variety of equity partners,” with terms determined on an individualized, venture-by-venture basis. The brochure stated that, “…equity partners are securitized by first mortgages on the property; paid interest at above market rates; and receive their full equity loan in a balloon payment together with an agreed upon bonus at the sale of the renovated property.”

Baston documented the terms of these investments in promissory notes, in which he promised to pay interest rates, often as high as 20 or 30 percent, to investors along with a guaranteed return on their principal balance within short periods of time, often 30 days or less.

On many occasions, Baston initially repaid both the invested principal and interest as promised, which served to entice his investors to continue investing in Will James Equity Partners, and in most cases, to invest additional, larger sums of money. To make these initial payments to new victims, Baston used monies from other investors, rather than from purchasing, renovating, and flipping preforeclosure properties as he had described to investors. Because his victims believed these initial investments to be successful, many agreed to roll-over their invested funds into new investments, or often invested additional, larger sums of money in the scheme.

Once his targets invested a significant amount of money in Will James Equity Partners, Baston stopped paying them the promised interest and did not return their principal. Eventually, when the victims began to complain to Baston that he had deceived them, Baston employed a variety of lulling tactics and avoided responding to their calls and inquiries. Baston specifically instructed his remaining staff members to deflect inquiries from victims in order to avoid them. When he was unable to avoid some of his investors, he gave false explanations as to why they had not been paid. Despite his claims to victims that Will James Equity Partners, had financial difficulties and was unable to pay back its current investors, Baston continued to recruit new investors by falsely representing the enterprise’s success. In some instances, Baston paid the most vocal victims with the funds he received from these newer investors.

The Indictment alleges that Baston obtained over $10 million from his victims pursuant to this scheme, and charges him with 11 counts of mail fraud and six counts of wire fraud. If convicted on all counts charged in the Indictment, Baston faces a maximum of 85 years’ imprisonment.

Last November, when my book Flipping Houses For Dummies came out, I billed it as a book about “Flipping Houses the Right Way.” In the book, I provide readers with a realistic approach to flipping houses that does not guarantee easy, risk-free, hassle-free riches through investing in real estate. I show people how to estimate expenses and profits realistically and build in enough of a buffer to be fairly certain of earning a 20-percent return on their investments before they even buy a property. I am careful to say, however, that no form of real estate investing is entirely 100% risk-free.

I was disturbed to see in a recent article, “‘Flip This House’ Star Accused of Fraud,” that the star of the A&E television show Flip This House, Atlanta businessman Sam Leccima, wasn’t exactly following my lead and flipping houses the right way. If the allegations are true, Leccima didn’t even own the properties he was supposedly buying, rehabbing, and selling. The entire “reality” show was one big farce, giving a whole new meaning to the concept of “staging” a home.

For their part, A&E recently issued the following statement:

We are dismayed about the allegations concerning Mr. Leccima, which only recently came to light. A&E Television Networks is not a party to any of the transactions shown in Flip This House, and we believed that the programs accurately depicted the featured properties and sales. As soon as we learned of these allegations, A&E took all episodes featuring Mr. Leccima off the air, and they will remain off the air pending further investigation. A&E no longer works with Mr. Leccima. After the second season of Flip This House, we decided to change direction and focus on different cast members, as we did after the first season.

This breaking story reveals something that honest real estate professionals have been aware of for a long time—not everyone who claims to be an expert in real estate investing is the real thing. Real estate investment gurus abound, promising that their system for investing in real estate offers a no-risk, no-hassle way to big overnight profits. The fact is that you can earn excellent profits by investing in real estate, but that it requires hard work, know-how, and stictoitism. You have to know what you’re doing and work hard to make it happen. In the flipping arena, you have to flip houses the right way, preserve your integrity, and earn the trust of your community in order to achieve long-term success and profits.

Remember that the homes you are flipping are real. The money you invest is real. The families who end up living in the homes you flip are very real. So don’t follow someone who dangles a get-rich-quick carrot in front of your nose or broadcasts an unrealistic version of a supposed reality show. If it sounds too good to be true, it probably is.

Launched in the fall of 2005, this site–FlippingFrenzy.com–has become one of the leading resources for following the crusade to spot, stop, and report real estate fraud. Using this site, homeowners and real estate industry professionals alike can learn about the latest efforts in the fight against the type of “flipping” that involves scammers and fraudsters committing, in many cases, mortgage fraud, and how to report it. However, what if you want to learn how to flip houses the right way, for an honest profit? Check out my new site, GetFlipping.com.

GetFlipping.com is devoted exclusively to the practice of flipping houses–buying fixer-uppers below market value, repairing and renovating them, and then selling them at or near full market price. GetFlipping.com will become a comprehensive house flipping Web site available. Right now, visitors can read a sample chapter from my new book, Flipping Houses For Dummies, check out the Flippers Tip of The Day, read an account of a sample property I flipped, check out before and after photos, and sign up for a free 31-day house flipping course.

Although the title of the Web site encourages visitors to “get flipping,” the site actually offers a more realistic view of flipping houses, pointing out some of the risks and pitfalls that investors face whenever they choose to invest in real estate. GetFlipping.com and Flipping Houses For Dummies both advise novice investors to build a strong investment team, including a licensed Realtor®, mortgage broker, and real estate attorney.

My goal in creating GetFlipping.com and writing Flipping Houses For Dummies is to help real estate investors, particularly novice investors, minimize their risks and maximize their profits. Investors must remember that you make your profit when you buy, so you have to be sure you are buying a property that you can sell for twenty percent more than your total investment in it.

Flipping Houses For Dummies includes instructions and a form for estimating the potential profit, and within the next week or so we will add an automated Purchase Price Estimator to GetFlipping.com that can help investors estimate their maximum purchase price in order to be fairly certain of earning a 20% profit.

GetFlipping.com also includes a blog, where I post additional information on house flipping and real estate investing in general, and where visitors can post their own comments, questions, and house flipping stories. Ultimately, I want to create a dynamic community of house flippers who can share information, tips, and strategies, and celebrate one another’s success.

Buy a $2 million dollar house for $1.5 million? That’s what some con artists would have you believe in a fairly common illegal house flipping scheme that targets novice real estate investors.

Here’s how it works. A sham company advertises a FREE real estate investment seminar in your area. All you have to do is register with your name, address, phone number, and social security number. The company uses this information to pull the credit reports of registrants and identifies registrants who have top-notch credit scores–people who are likely to be approved for big loans. These lucky winners become the targets of the scam.

At about the same time, the company does a little research to find expensive homes that have been on the market for a year or more–homes that the sellers are probably pretty eager to unload. They approach the sellers with a deal. Say the sellers have had the home listed for $1 million for the past year. One of the company’s representatives approaches the sellers and says, “We’ll buy your home and pay full price under one condition–you take it off the market for three months and then re-list it at $2 million.”

If the seller agrees, the company hires an appraiser willing to value the home at $2 million. At the FREE seminar, the speaker or one of his accomplices approaches an attendee who’s been identified as someone able to qualify for a big loan. He tells the would-be investor, “We have an excellent opportunity for you–a $2 million home you can buy for $1.5 million.” Assuming the investor is on board, all of the pieces are in place to execute the scam.

The company helps the investor obtain a loan for $1.5 million payable to the company, pays the sellers $1 million for the property, and pockets the remaining $500,000. The investor ends up owing $1.5 million on a house that’s probably not even worth the seller’s original asking price of $1 million. In an attempt to score a quick $500,000, the investor loses at least $500,000!

To avoid falling victim to such a scam, take the necessary precautions:

1. Don’t provide sensitive information, especially your social security number, to any company you don’t have reason to trust.
2. Avoid registering for FREE investment seminars online or off. They’re usually in the business of selling you their investment program or identifying potential marks.
3. Question the logic of the deal. If someone knows of a $2 million property they can buy for $1.5 million, why are they telling you about it? Wouldn’t they want that sweet deal for themselves?
4. Research the property yourself. By looking at MLS listings for comparable properties for sale in the same neighborhood, you can quickly determine whether the price is inflated.
5. Remember that if it sounds too good to be true, it probably is.

You can make money investing in real estate, but you have to do your homework. If someone approaches you with a great deal, it may be a great deal, but you can’t be sure until you’ve done some of your own research. Never buy a house you haven’t seen with your own two eyes. Have your own, independent Realtor® or appraiser provide a second opinion.

Robert “Bob” Bruss–a California Real Estate attorney/broker and the former director of the National Association of Real Estate Editors, but best known as a respected and widely syndicated writer and consumer advocate for all things Real Estate–just reviewed my latest book, Flipping Houses For Dummies. From Bruss’ weekend column:

Realty Broker Reveals How to Profit From Flippers
By Robert Bruss
Sunday, December 17, 2006

In good markets or bad, real estate broker Ralph R. Roberts reveals in “Flipping Houses for Dummies” how he acquires run-down houses, fixes them up, and then either “flips” (sells) them for a profit or holds for long-term investment. Roberts, a highly respected real estate author, trainer and broker, shares his techniques along with advice on how to minimize the tax bite on profits.

Every serious real estate investor who wants to earn large profits needs to understand the methods Roberts uses because he has perfected flipping houses almost to a science. He thoroughly understands and explains all the critical aspects, including locating the properties to determining if they are suitable, negotiating a successful purchase, supervising the fix-up work, and making a profitable resale.

As a longtime real estate broker, Roberts knows all aspects of the home brokerage business and he doesn’t hesitate to share his insider secrets. For example, he says, “Nothing on the MLS (multiple listing service) is the gospel truth. Sellers and real estate agents alike often estimate room sizes or make mistakes when entering details. Approach all prospects with a discerning eye.”

Even if you are not interested in “quick flip” real estate profits, this is a great book to study because the author shares so much of his real estate knowledge which he gained, starting at age 19, over more than 30 years in the real estate business.

Maybe Roberts is getting a little “salty” in his old age, but he exposes secrets most Realtors would never share with their clients. Examples include how to obtain a “listing history” of a property, how to determine what the seller paid, how long the property has been on the market even with more than one listing, and if the property is difficult to “unload.”

This is a “fun read” book in the usual dummies style, which includes features such as tips, warnings and even several sanity checks. Along the way, Roberts shares many personal examples to illustrate the topics, making the book extremely valuable so the readers don’t make the same mistakes he made.

Throughout the book there is heavy emphasis on what to look for in a potential flipper house, how to locate them, how to acquire them, and how to finance them. Roberts provides valuable insights about the importance of borrowing funds. “As a real estate investor, good debt gives you leverage,” he advises, meaning you control the property with little of your own cash.

Along the way, there are several excellent checklists such as the “profit projector” and the “home inspection checklist” so no important aspect is overlooked when evaluating a possible flipper candidate.

Especially valuable is the chapter on “The Art of Haggling: Negotiating a Price and Terms.” Having sold thousands of homes at his real estate brokerage, Roberts is a “pro” when it comes to negotiation and putting sales together. His negotiation strategies are priceless. I especially enjoyed the part about “digging up pertinent information about the seller.” If you are a serious real estate investor, this chapter is a “must read.”

Foreclosures receive extra attention because they offer special flipper profit opportunities. Acquiring these properties can be tricky, but Roberts simplifies the process as much as possible without getting bogged down in details. Of course, it helps that he has a full-time associate who specializes in acquiring these distress properties.

This book is designed for realty investors who want to profit from buying below market, making cosmetic improvements to add value, and then quickly reselling. But real estate agents and home buyers should also study it because of the valuable insights offered by a longtime, very successful real estate broker. On my scale of one to 10, this superb book rates an off-the-chart 12.

Flipping Houses for Dummies, by yours truly and Joe Kraynak is available in stock at bookstores across the country or from Amazon.com.

In August of 2005, a federal grand jury returned a twenty-one-count indictment against four people for participating in an extensive land-flipping scheme involving residential properties in Manatee and Sarasota Counties, Florida. Named in each of the twenty-one counts were Kelly Abercrombie and her husband, Todd Kerber. The indictment alleged that Abercrombie and Kerber, along with Todd Kolbe, Kirk McVey, Aaron Kolbe, and Amy Samelson, participated in a scheme to defraud Home Star Mortgage, LLC, a New Jersey based mortgage lender which made, bought, and sold residential loans/mortgages, by illegally flipping some thirty residential properties located in Bradenton, Osprey and Sarasota, Florida.

The indictment alleged that companies owned and controlled by Kolbe and Abercrombie purchased residential properties at or near their fair market value and immediately flipped or resold them to straw buyers who received mortgage loans in amounts substantially higher than the value of the properties.

The reason I mention this now–a full year-and-a-half later–is because this morning’s online edition of the Herald-Tribune reports that some of these fraudsters have finally been sentenced and are now heading federal prison in South Dakota. For an extensive account of one family’s involvement in real estate fraud, read Family, friends in on real estate plot, by Herald-Tribune business reporter and columnist Michael Braga.

Smile… today is Friday

In the style and tone of NBC’s The Office and Comedy Central’s Reno 911, Flipper Nation takes on the seemingly simple and profitable world of flipping real estate. Can Richie and David flip their way to becoming millionaires, or will they flop their way into the poor house? There is more where this came from over at FlipperNation.com.

The day HUD released FR (Final Rule)-4615: Prohibition of Property Flipping, “flip” became a four-letter word. Utter the F word at a real estate conference or seminar, and you’re liable to be spending your lunch break at a cozy table for one. After all, flipping real estate is unethical, and according to the government, flipping is illegal…or is it?

To most people who read this blog, “flip” may very well be a four-letter word, but to the hundreds of thousands of people who tune in to reality TV shows like “Property Ladder” on TLC, Discovery’s “Flip That House,” and “Flip This House” on A&E, flipping is a shrewd, honorable, and perfectly legal way to earn a series profit in real estate.

Real estate “flipping,” or buying a property cheaply, renovating it to add value, and quickly reselling it at or near market value for a profit, is on the rise. If you want to get in the game, legally, or if you’re already in it and want expert advice and tips to become more successful, my newly published book, Flipping Houses For Dummies, can be your guide.

Flipping Houses For Dummies is a no-nonsense book that gives you the start-to-finish scoop on buying, renovating, and selling property, with plenty of time- and money-saving tips, strategies, and warnings to keep you on budget and on schedule. Topics covered include:

• Find properties to flip
• Project your profits
• Secure financing
• Draw in buyers
• Work with contractors, agents, and other real estate professionals
• Steer clear of legal gray areas, including cash back at closing schemes

Flipping Houses For Dummies will also make you aware of savvy strategies for negotiating deals, modernizing for maximum profit, marketing flipped properties, avoiding common blunders, and staying afloat in a slow market. Also included is coverage on negotiating, property inspections, mortgages, taxes, and working with contractors, brokers, and real estate agents.

Like all ‘For Dummies’ books, mine concludes with a “Part of Tens,” including chapters titled “Ten Renovation Cost-Cutting Strategies,” like hiring students over the summer and buying overstocked or discontinued building materials, and “Ten Common House Flipping Blunders” such as failing to inspect the property before closing on it. The “Cheat Sheet” in the front of the book provides lists of signs of attractive fixer-upper and potential money pit, as well as check lists for home staging and cosmetics.

Flipping Houses For Dummies is available at bookstores all across the U.S., and can be purchased online from Amazon.com.

This past Sunday, Grand Rapids Press columnist Nancy Crawley took a shot at John Hayes, President and CEO of HomeVestors of America, because of a fight Hayes’ is leading to convince the Michigan state legislature to remove the words “flip” and “flipping” from bills that protect consumers against the scammers and fraudsters who commit real estate and mortgage fraud.

While HomeVestors–a Dallas, TX-based franchisor that trains an supports its franchisees in the art of flipping properties–supports legislation aimed at eliminating real estate fraud, Crawley reports that Hayes wants state lawmakers to understand that “flipping” a house is neither nefarious nor should it be made illegal. By the end of her column, Crowley basically says that Hayes’ is making a mountain out of a molehill, because regulators at the Michigan Office of Financial and Insurance Service say the proposed bills would not criminalize the practice of “flipping” if done legally.

While I understand Crawley’s criticism of Hayes and the stink he’s making over all of this, Hayes does have a somewhat legitimate concern. As I wrote for RealtyTimes.com back in January of this year, the day HUD released FR (Final Rule)-4615 Prohibition of Property Flipping, “flip” became a four-letter word. Utter the F word at a real estate industry conference or seminar, and you’re liable to be spending your lunch break at a cozy table for one. After all, flipping real estate is unethical, and according to the government flipping is illegal … or is it?

To some real estate processionals, “flip” may very well be a four-letter word, but to the hundreds of thousands of consumers who tune in to reality TV shows like Flip This House and Flip That House, flipping is a shrewd and honorable way to earn a buck. So, who’s right?

The bottom line is this… Real estate flipping has a double meaning, a split personality, a sunny and a sinister side. Criminals practice flipping to artificially inflate home values and sell overpriced homes to ill-informed buyers. Or they cash out the inflated equity, sticking the lender with the bill and leaving a legacy of foreclosures and vacancies. The dark side of flipping destroys credit ratings, raises interest rates, and ruins neighborhoods. Over the long haul, it threatens to squash the American dream of home ownership. It is unethical, immoral, and illegal.

Flipping the right way, however, is a perfectly legitimate strategy for making money in real estate. You buy a property below market value, fix it up, and sell it for more than you invested in it. Do it well, and you can earn a handsome profit. Make a serious blunder, and you suffer a loss. The fix-it-and-flip-it approach that HomeVestors supports has a positive effect on communities and the real estate market as a whole. It increases property values, improves neighborhoods, and provides quality housing for those who need it. It’s the American dream — capitalism at work.

If you need further proof that you must do your due diligence before entering into a real estate transaction, look no further than to the three-year prison sentence a Springfield, Massachusetts, pastor (yes, I said ‘pastor’ as in ‘religious minister’) received late last week for his role in a real estate fraud scam. From WCVB-TV, Boston’s Channel 5 News:

A Springfield pastor who admitted defrauding his own parishioners in a $600,000 real estate scam was sentenced to three years in prison. The Rev. Paul Starnes was also sentenced Friday to five years probation and ordered to repay $137,000 to two banks defrauded in the scheme.

In January, Starnes pleaded guilty to two counts of wire fraud and one count of conspiracy to launder money. Federal prosecutors said Starnes and two others from Trinity Mortgage Brokerage Co. were involved in a land-flip scheme that involved buying depressed properties and paying off appraisers to inflate their values. They then recruited poor, first-time buyers and drafted phony financial documents to obtain mortgages.

Assistant U.S. Attorney William M. Welch told U.S. District Judge Michael Ponsor that the minister targeted four of his own parishioners at the Morning Star Church. “I can’t figure out what’s worse: Defrauding a total stranger. Or a family member. Or one of your parishioners,” Welch said.

Starnes’ attorney, Peter Ettenberg, argued his client should be given credit for helping prosecutors win convictions against two of his employees. He told Ponsor that Starnes’ resorted to unethical practices while arranging loans when his company struggled in the late 1990s.

This is not the first time–nor do I suspect it’ll be the last–that religion has found its way into a real estate fraud scam. So-called ‘mortgage elimination’ companies will sometimes use biblical references to lure susceptible homeowners into their web of deceit and trickery (if you’re not familiar with these scams, mortgage elimination schemes work because they resonate with the most vulnerable of homeowners–namely, those who are facing bankruptcy or foreclosure and believe God can and will bail them out).

If you suspect that you’re being taken advantage of inside the confines of a real estate-related transaction, seek help immediately. Click here for further details on who to turn to for help.

If you cheated lenders out of $2.3 million, you’d think, wouldn’t you, that you’d be fined at least that amount plus interest and penalties? Apparently not! From yesterday’s online edition of Cincinnati’s The Enquirer:

…defendants in the government’s crackdown on mortgage fraud through corrupt home sales were sentenced to prison Wednesday, including a Butler County man who cheated – and tried to cheat – lenders out of $2.3 million over a three-year period. On Wednesday, it was the day of reckoning for what one federal prosecutor called a “prime player” in the mortgage fraud scheme…

…In addition to fooling lenders into making steep loans on homes, most of which ended up in foreclosure, Husvar underreported his income for 2000 and 2001, resulting in the evasion of $26,589 in income taxes due for those years.

[U.S. District Judge Susan] Dlott sent [Timothy] Husvar to prison for two years, starting in September. She fined him $40,000 and ordered him to pay back taxes….

David M. Green, 49, of Franklin, received 26 months in prison, three years’ probation, 600 hours of community service, a $50,000 fine and an order to pay $82,751 in back income taxes.

Lisa Holderman-Powers, 31, of Cincinnati, received 18 months in prison, five years’ probation, 600 hours of community service, a $35,000 fine and an order to repay $1 million to Trust Corp. Mortgage.

Richard Frazier, 46, now of Cape Coral, Fla., received two years in prison, five years’ probation, 600 hours of community service, a $45,000 fine and an order to pay $45,312 in back income taxes.

Another defendant, Jeff Henry, 44, of Cincinnati, was sentenced Monday. He received 12 months in prison, five years’ probation, 600 hours of community service, a $10,000 fine and an order to pay $16,612 in back taxes.

Unless there’s a typo in that story, according to my math, including fines and taxes, the five defendants in this case have been ordered to pay $1,351,264, which is roughly $1 million shy of what they stole. And when you figure in that $171,264 of the total was for back taxes–meaning, taxes already owed–the fine really only amounts to $1.18 million, which is certainly less than the $2.3 million these crooks stole.

Where’s the justice in that? Click here for The Enquirer’s full write-up on the sentencing, which includes a piece about how Husvar has been spending his time since the summer of 2003 when he first admitted to committing bank fraud, conspiracy and income tax evasion. What a joke!

2006-03-31 10:25
BankRate.com has an interesting article about the challenges and pitfalls associated with flipping properties. Check it out by clicking here.

As I wrote in an article published by RealtyTimes.com back on the 31st of January, the day HUD released FR 4615, the “Prohibition of Property Flipping” rule, “flip” became a four-letter word. Utter the F word at a real estate conference or seminar, and you’re liable to be spending your lunch break at a cozy table for one. After all, “flipping” real estate–as defined by HUD–is unethical and illegal.

Flipping the right way, however, is a perfectly legitimate strategy for making serious money in real estate. You buy a property below market value, fix it up, and sell it for more than you invested in it. Do it well, and you can earn a handsome profit. Make a serious blunder, and you suffer a serious loss, and that’s what the BizRate.com article suggests.

The fix-it-and-flip-it approach has a positive effect on the real estate market. When done correctly, flipping increases property values, improves neighborhoods, and provides quality housing for those who need it most. It’s the American way–capitalism at work.

Here’s a classic and timely example of a fraudster caught in a “flipping” scheme. Ohio authorities announced charges yesterday against the former Cincinnati man who they say bilked nearly $5 Million from financial institutions by buying low and then selling high using inflated appraisals. From this morning’s online edition of The Cincinnati Enquirer:

The former operator of a Cincinnati real estate company could face up to 30 years in prison and $1 million in fines after agreeing to plead guilty to three charges in the federal probe of mortgage fraud in Greater Cincinnati. David Lockwood, who operated Lockwood Real Estate Holding Co. and now lives in Florida, will plead guilty to federal charges of bank fraud, conspiracy and money laundering, according to documents filed Tuesday in U.S. District Court. He is to appear in court Feb. 22.

Lockwood, who waived a federal grand jury indictment, was among a group of investors who conspired to defraud mortgage lenders by submitting false information on loan documents, authorities said. Investigators said the scheme focused on “flipping” low-value homes.

Flipping, a real estate practice of buying low-priced properties and trying to sell them for a quick profit, is legal. Illegalities can occur though, for example, if loan documents are falsified or if appraisals are rigged or inflated.

Separately, Paula Asher, a former apprentice appraiser, is scheduled to appear in U.S. District Court this morning to enter a guilty plea to one count of conspiracy to commit bank fraud. Federal investigators said she completed at least 17 inflated appraisals from September 2001 through June 2002 to support fraudulent loan applications. Investigators said her actions resulted in actual or intended losses of more than $719,000 for lenders.

Officials said Asher is the first appraiser to admit charges in the mortgage fraud investigation. More than two dozen individuals have admitted charges or agreed to plead guilty in the investigation into fraud involving more than $50 million in real estate purchases in and around Greater Cincinnati. To date 14 have been sentenced to prison terms ranging up to four years.

Investigators told the Enquirer that Lockwood acted as a seller of numerous ‘flipped’ properties, and in one sale in particular, purchased a house and property for $37,000 and sold it three (3) months later for $80,000, knowing the entire time that the property wasn’t worth anywhere near the higher amount.

As I pointed out in a recent article for Realty Times, flipping, when done properly, is a perfectly legitimate strategy for making money in real estate. Someone buys a property below market value, fixes it up (or not), and sells it–based on legitimate appraisals, not inflated ones–for more than they invested in it. Do it well, and you can earn a handsome profit. Make a serious blunder, and you suffer a loss. The fix-it-and-flip-it approach has a positive effect on the real estate market. It increases property values, improves neighborhoods, and provides quality housing for those who need it. It’s the American way–capitalism at work.

Conduct a flip based on inflated appraisals, and you too could be facing a million dollar fine and 30 years in prison!

I am very pleased to announce that I am now a contributing columnist to Realty Times, a leading real estate industry web site that over the last few years has become one of our most informative and timely sources of news and information.

Here’s a preview of my first article, ““Flip” — It’s Not Just Another Four-Letter Word”:

The day HUD released FR (Final Rule)-4615 Prohibition of Property Flipping, “flip” became a four-letter word. Utter the F word at a real estate conference or seminar, and you’re liable to be spending your lunch break at a cozy table for one. After all, flipping real estate is unethical, and according to the government flipping is illegal … or is it?

To you and your real estate colleagues, “flip” may very well be a four-letter word, but to the hundreds of thousands of people who tune in to reality TV shows, like Flip This House and Flip That House, flipping is a shrewd and honorable way to earn a buck in real estate.

So, who’s right? Well, to find that out you’ll need to read the article in its entirety by clicking here. And look for additional articles of mine to appear on RealtyTimes.com once every month.