Land Flip

We’d like to introduce everyone to a lifelong group of besties: Meghan, Molly, Mitch, Mark, and Clyde. This fabulous fivesome does everything together, and when they come across a vacant lot for sale, an idea begins to take shape in their conniving little brains: they’re gonna do a land flip.

A “land flip” is when a group of shady individuals gets together (either on their own or as part of a shifty company) and sells a piece of land back and forth, driving its price up well beyond what it’s actually worth before selling it to an unsuspecting outsider for a big ol’ profit.

For what it’s worth, land flips are fraudulent and illegal, but since we’re talking about undeveloped land, the value of which may or may not be 100% known, they can be hard to prove.

Anyway, in our scenario, Meghan, Molly, Mitch, Mark, and Clyde all go in on buying the aforementioned vacant lot for $100K, putting it in Meghan’s name. Then they “sell” the land to Molly for $105K. Then Molly sells it to Mitch for $110K, Mitch sells it to Mark for $115K, and Mark sells it to Clyde for $120K. Now along comes Shari, who’s in the market for a nice slice of land upon which to build her dream house. Shari falls in love with the lot owned by our fivesome and pays $125K for it, which seems supported based on the previous buy and sell prices. But boy, is she in for a surprise once she gets the land appraised: it’s only worth $100,000, and now she’s $25K in the equity hole before she even gets started on construction.