Land Flip

DEFINITION of 'Land Flip'

A fraudulent practice in the real estate business of selling undeveloped land at highly inflated prices. A land flip occurs when a group of dishonest buyers trades the land among its members, increasing the price with each transaction. The group will then finally unload the property onto an unsuspecting outside buyer at a price that the buyer will likely never be able to recoup from its own sale of the land.

BREAKING DOWN 'Land Flip'

Financial institutions face the risk of land flip with any loan made to purchase undeveloped property. They therefore take equity positions by investing directly in the land. Otherwise, they risk taking a loss if the land value decreases.