Remember the Beatles’ “Day Tripper” from about 50 years ago? Today, the Liverpool boys might sing about “Day Flipper”, based on the old practice of buying an item, or title to it (or the right to acquire title) ; and, then, within a short period, even simultaneously or sooner, selling it. Like a coin – “flipping” it, from one spot to another. The practice , when done properly, is legitimate and commonplace with any commodity (cars, collectibles, stocks, bonds, etc.) This piece focuses on various aspects with real estate, which has matured to an around the clock business activity.

Nowadays, the three most common methods of flipping are:

  1. Doug wants $ 200,000 for his home . Jon believes it is worth more. Jon contracts with Doug to buy the home for $200,000. Jon puts up a $5,000 deposit, and later closes with Doug, paying an additional $195,000. As soon thereafter as possible, Jon sells the home to Mary for $220,000. Jon has made $20,000, and is happy. Doug got his $ 200,000, and is happy (at least until he finds out Jon sold it for $ 220,000). Mary has the home, paid $ 220,000, and is happy. Someone will have had to pay $ 1410 in recording costs on the Doug/Jon deed, and $1550 on the Jon / Mary deed.
  2. Rather than closing with Doug, Jon sells the purchase agreement to Mary for $25,000., presuming the contract permits it. Jon has now profited $20,000, and is happy. Mary closes with Doug, paying him the remaining $195,000 (remember the deposit ) Her total investment is $220,000. Mary has the home, and Doug has the $ 200,000. The second recording charge is inapplicable.
  3. Rather than a purchase agreement whereby Jon agrees to pay Doug $200,000, he acquires an “option” from Doug, whereby he has the right to buy the property (but not the obligation) for $200,000. Jon pays Doug $5,000 for the option. Jon then sells the option (by assignment, just as with the purchase agreement) to Mary for $25,000. Same result as with the purchase agreement, assuming the transaction closes. If Mary fails to close, she is out $25,000. Doug keeps the initial $5,000, and still owns the house. The reason this phenomenon could aptly be called “day flipper” is because it is occurring thousands of times every day, not just in Jacksonville, or Florida, but in all parts of the country. Title to real estate , or contracts (or options) to buy , are being sold 24 hours a day. Often, with houses never being seen. Classic speculation, counting on inflation and shortage of homes. The speculators are not pursuing homes to live in, but rather to legitimately trade (or flip) for a profit. It has become far more than a “cottage industry” in the country’s real estate economy. Homes and other real estate , contracts, and options are being bought and sold in large packages, with experts contending the end is not in sight.