Which of the following best describes the difference between a flipping scheme and a flopping scheme in mortgage fraud?

• A. In a flopping scheme, the value of the first transaction is deflated instead of inflating the second transaction.
• B. In a flopping scheme, the second transaction in the scheme usually occurs several years after the first.
• C. In a flopping scheme, the original seller always ends up as the final owner of the property.
• D. In a flopping scheme, the lender is not one of the potential victims of the scheme.

Answer: (A)

In flipping versus flopping, the key distinction is where the fraudulent value manipulation happens in the sequence of sales. In a flopping scheme, the initial sale price is deflated, not inflated, to distort the apparent equity at the start. This deflation sets up the subsequent transaction to appear legitimate to lenders, even though the underlying numbers are fraudulent. The result is a misrepresentation of how much equity actually exists when the property is moved again, which is how the fraud is pulled off.

So this choice captures the essential difference: the manipulation targets the first transaction’s value by deflating it, rather than inflating the second transaction’s value. The other details—such as the exact timing between transactions or who ends up owning the property—do not define the scheme. Lenders are typically the victims in these schemes because their underwriting relies on the distorted numbers.