Legal Definitions - flip

The term "flip" is a versatile slang term used in several legal and financial contexts, primarily referring to quick transactions for profit, refinancing, or cooperating with authorities.

• Quick Resale for Profit (Real Estate or Securities)

  In this context, "flip" refers to the practice of buying an asset, such as real estate or securities, and then quickly reselling it, often within a short timeframe, with the primary goal of making a rapid profit from the price difference.

  • Example 1 (Real Estate): A developer purchases an older commercial building in a rapidly gentrifying neighborhood. They invest in cosmetic upgrades like new paint, flooring, and updated fixtures, and then list it for sale within six months, hoping to attract a buyer willing to pay a significantly higher price due to the improvements and market appreciation.

    Explanation: This illustrates "flipping" because the developer bought the property with the explicit intention of making quick, relatively minor improvements and reselling it quickly for a profit, rather than holding it as a long-term investment or for personal use.

  • Example 2 (Securities): An investor subscribes to shares in a highly anticipated technology company's Initial Public Offering (IPO). On the first day the stock begins trading publicly, the share price surges. The investor immediately sells their shares to capitalize on the initial price jump.

    Explanation: Here, "flipping" describes the investor's strategy of acquiring shares at the IPO price and then selling them almost immediately after the market opening to secure a quick profit from the initial demand and price increase.

• Refinancing Consumer Loans

  When applied to loans, "flip" means to replace an existing consumer loan with a new one, typically to obtain more favorable terms, such as a lower interest rate, a different payment schedule, or to consolidate multiple debts.

  • Example 1: A person has a car loan with a high interest rate due to their credit score at the time of purchase. After improving their credit, they apply for and obtain a new car loan from a different lender at a much lower interest rate, using the funds from the new loan to pay off the original, more expensive loan.

    Explanation: This is an example of "flipping" a loan because the borrower replaced their existing car loan with a new one to achieve better financial terms, specifically a lower interest rate.

  • Example 2: A student has several high-interest personal loans from different lenders. They apply for a single, larger personal loan with a lower overall interest rate from a credit union, using the proceeds to pay off all their previous, more expensive loans.

    Explanation: This demonstrates "flipping" loans by consolidating multiple existing debts into a single new loan with more advantageous terms, simplifying payments and potentially reducing total interest paid.

• Cooperating with Authorities (Slang)

  In a criminal context, "flip" is slang for an individual involved in a crime agreeing to "turn state's evidence." This means they choose to cooperate with prosecutors and law enforcement by providing testimony or information against their co-conspirators or others involved in criminal activity, often in exchange for a reduced sentence, immunity, or other favorable treatment.

  • Example 1: During an investigation into a drug trafficking ring, a low-level courier is arrested. Facing a lengthy prison sentence, the courier decides to "flip" by providing detailed information about the ring's operations, suppliers, and higher-ranking members to the federal prosecutors.

    Explanation: The courier is "flipping" by agreeing to cooperate with the authorities and testify against their former associates in exchange for a potential reduction in their own legal consequences.

  • Example 2: Two individuals are charged with embezzlement from a company. One of the individuals, realizing the strength of the evidence against them, decides to "flip" and offer to testify against their accomplice, detailing how the scheme was planned and executed, in hopes of receiving a lighter penalty.

    Explanation: This scenario illustrates "flipping" as one defendant chooses to provide evidence and testimony against their co-defendant to the prosecution, seeking a more lenient outcome for themselves.