Phoenix real estate strategy of 'flopping' examined: "As more houses in metro Phoenix go on the market for short sales, some investors have begun buying and reselling them quickly for a profit, using strategies that some in the housing industry say could be unethical or worse.
The deals work in a variety of ways, but all involve the same basic strategy. An investor persuades a lender to agree to a short sale, buying a house for less than what the lender is owed. But the investor has another buyer lined up who is willing to pay more.
The bank, usually unaware of the other waiting buyer, accepts a lower price from the investor, who then quickly resells the home - for a higher price - to the waiting buyer.
The deals, which have become more common as short sales have increased, are now drawing the attention of real-estate and financial regulators.
Most lenders object to such deal-making because, had they been aware of the other waiting buyer, they would have taken the higher price. Banks take a loss on short sales, and the deals can make their losses greater."