What is the most common indicator of illegal property flipping?

The most common indicator of illegal property flipping is falsely inflated appraisal. This typically occurs when an investor buys a property and then quickly appraises it at a significantly higher value than its actual worth, often following superficial or minimal renovations. This inflated appraisal is essential for securing financing and making the flip appear profitable. Property flipping becomes illegal when it involves fraudulent practices, and an inflated appraisal is a red flag for potential fraud since it distorts the true value of the property.

Falsely inflated appraisals can lead to various issues, including inflated loan amounts, leading lenders to lose money when the true market value doesn't support the appraised figure. This process can also contribute to broader market instability, making it a critical concern for authorities and regulatory bodies that monitor real estate transactions for integrity.

Other indicators like underwriting hassles, unrepresented sellers, or violations of fair housing laws may arise in different contexts but don’t directly indicate illegal flipping as clearly as a fraudulent appraisal does.