3 ms·

This is house flipping, not arbitrage.

biot 11y ago
It's not flipping. Flipping is where Bob fully completes the purchase of a property from seller Alice, Bob pays the property transfer tax [0], Bob takes possession of the property as the new owner on the title, and then Bob re-lists his property on the market at a new price, ultimately completing the sale to Charlie. What's happening here is that agents involved in the sale of Alice's property provide Alice with a price of (for example) $1M, which Alice accepts under the assumption that her agent is representing her interests fairly and objectively. After Alice accepts this price, the purchase is delayed. While Alice waits to receive $1M for the sale, Eve (another agent) is assigned the property and sells the assignment to Bob for $1.25M. Bob then sells his assignment to Charlie for $1.5M. Charlie then completes the purchase, and only then is the property transferred from Alice to Charlie. Charlie pays $1.5M, but Alice receives only $1M. Eve and Bob both profit $250K each, never having taken possession of the property themselves. [0] The tax is charged at a rate of 1% for the first $200,000 and 2% for the portion of the fair market value that is greater than $200,000. Source: http://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/understand http://www2.gov.bc.ca/gov/content/taxes/property-taxes/prope...
- buzzdenver 11y ago
  I don't think there's a strict definition of flipping. What's happening here is much closer to flipping than arbitrage for any sensible definition of those.
  - biot 11y ago
    My understanding of flipping was what I thought to be a common-sense one. However, upon researching it further I stand corrected: https://en.wikipedia.org/wiki/Flipping#Wholesaling_and_assigning_a_contract https://en.wikipedia.org/wiki/Flipping#Wholesaling_and_assig... One part of that article that stands out is that this is possible because the seller is generally not getting market value, which implies that the seller's agent isn't doing a great job of representing them: "This practice is often frowned upon in the real estate community since it seems unethical or illegal. In practice there is nothing illegal about wholesaling or assigning rights to a purchase contract even if it is multiple times. It is important to understand that the reason there is an opportunity to wholesale is because the original seller is selling the property for substantially less than market value."

biot 11y ago

It's not flipping. Flipping is where Bob fully completes the purchase of a property from seller Alice, Bob pays the property transfer tax [0], Bob takes possession of the property as the new owner on the title, and then Bob re-lists his property on the market at a new price, ultimately completing the sale to Charlie. What's happening here is that agents involved in the sale of Alice's property provide Alice with a price of (for example) $1M, which Alice accepts under the assumption that her agent is representing her interests fairly and objectively. After Alice accepts this price, the purchase is delayed. While Alice waits to receive $1M for the sale, Eve (another agent) is assigned the property and sells the assignment to Bob for $1.25M. Bob then sells his assignment to Charlie for $1.5M. Charlie then completes the purchase, and only then is the property transferred from Alice to Charlie. Charlie pays $1.5M, but Alice receives only $1M. Eve and Bob both profit $250K each, never having taken possession of the property themselves. [0] The tax is charged at a rate of 1% for the first $200,000 and 2% for the portion of the fair market value that is greater than $200,000. Source: http://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/understand http://www2.gov.bc.ca/gov/content/taxes/property-taxes/prope...

buzzdenver 11y ago
I don't think there's a strict definition of flipping. What's happening here is much closer to flipping than arbitrage for any sensible definition of those.
- biot 11y ago
  My understanding of flipping was what I thought to be a common-sense one. However, upon researching it further I stand corrected: https://en.wikipedia.org/wiki/Flipping#Wholesaling_and_assigning_a_contract https://en.wikipedia.org/wiki/Flipping#Wholesaling_and_assig... One part of that article that stands out is that this is possible because the seller is generally not getting market value, which implies that the seller's agent isn't doing a great job of representing them: "This practice is often frowned upon in the real estate community since it seems unethical or illegal. In practice there is nothing illegal about wholesaling or assigning rights to a purchase contract even if it is multiple times. It is important to understand that the reason there is an opportunity to wholesale is because the original seller is selling the property for substantially less than market value."