5 Red Flags To Look For When Buying a House

Buying a house is an emotional process. There is excitement about owning a new home. Fear of committing to such a financial decision. Mental exhaustion to go through all the paperwork. Enjoyment dreaming about how to decorate your new home. You name the emotion and probably go through it while buying a house. It is important to remember that if something doesn’t seem right, it probably isn’t. You should look out for five red flags when buying a home.

There is a conflict of interest between the sellers and their agent

First, be wary if the sellers use a family member, a business partner, or a good friend as their agent. Buying a home should be purely a business transaction, and inviting loved ones to help mediate the process can be challenging. If closely involved with the sellers, the seller’s agent may have a tough time fairly negotiating with your agent without trying to make decisions based on emotion rather than reason.

For those seeking a more streamlined and purely transactional experience, some buyers turn to professional online home buyers or investment firms that operate on volume, such as those specializing in Indianapolis wholesale real estate deals. These entities often present clear-cut offers with fewer emotional entanglements, allowing the process to focus squarely on the financial and property details.

The sellers have a contingency of finding a house of their own

The sellers may put a contingency in your contract that says they must find a home of their choosing. Be cautious if you see this. If you agree to proceed with the deal, knowing this contingency is on the table, ask many questions and get your answers in writing.

• What is the sellers’ timeline?
• Are they under contract with a new house now?
  • If they are, how long is their escrow period?
  • How far along are they at this point? Have they had their inspections? Have they lifted their contingencies?
• If not under contract with a new house, what is their plan?
• Do they plan to leave their current home by the end of your escrow period?
  • Are they open to a lease-back option if they do not want to move out until they buy their next home?

Ask these questions and get them in writing by including the answers in the contract.

If the sellers are not under contract for a new house when your offer is accepted, I recommend giving them a deadline to do so. You want to pressure them to find a home early on in your escrow period so you can close reasonably and avoid unnecessary delays.

Let’s say your escrow period is 60 days, which is pretty standard and typical. What happens if they don’t find a new house to put an offer on until day 50 of your escrow period? Likely, they won’t close before your escrow period is up. They will have to ask you for an extension on closing, which you will often grant after investing almost two months into this new house. But now you are looking at maybe two more months to move into your new home.

Instead of moving in a couple of months after accepting your offer, you are now looking at moving in at least four months later. This can be a significant burden if you need to get out of your current living situation. You may also face financial penalties if you need to extend your loan rate lock.

Both parties must understand and agree to the timeline for the sellers to find a new home. All “what-ifs” need to be addressed by both parties.

The sellers’ disclosures seem incomplete

Let me preface this section by stating that disclosure requirements vary from state to state. Typically, sellers should disclose:

• major leaks, water damage, and/or flooding
• history of major construction repairs
• pest infestations
• DIY projects, permitted or not
• faulty appliances
• cracks in the foundation
• electrical problems
• plumbing issues
• death or crime committed on property
• neighborhood nuisances
• any other major issue or defect, past or present

Not only should sellers be disclosing major changes, issues, damage, or defects to the house, but they should also disclose documents related to past inspections and the HOA, if there is one.

If the sellers seem hesitant to disclose a document or push you to accept a document, alarm bells should go off. If their explanation to your inquiry doesn’t add up, there is probably reason to be cautious. Investigate further. If you are able, take the time to check public documents on the house to see if the sellers have failed to disclose any necessary information.

You must ask for HOA documents. You want to know how the HOA fees are being handled. What is saved up in the reserves? Who is in control of the HOA and the reserves? What was spent by the HOA over the last decade and why? What are the upcoming repairs and fees?

What if the sellers, who are part of a very small HOA, say there are no documents? They say everything is very informal and dealt with on a case-by-case basis with the other owners. Run!

No matter how small the HOA, everything must be documented. The last thing you want to worry about is moving into a home and then dealing with a nightmare of an HOA system.

You want to see documents, documents, documents. If you want to buy a house, you want to know that house in and out. You want to see every detail, record, and inspection the house has ever had.

It’s very important to choose a reliable home inspector. They will look out for you. They can find problems. For example, they can see bad DIY work, things that were not fixed, and big problems like foundation issues. If you plan to buy real estate, especially expensive places, work with a trusted agency. If you want to buy a luxury apartment in Phnom Penh, a good real estate company can help you understand all the property papers. An inspector can find hidden problems that are not in those papers. This can help you talk to the sellers and get a fair price.

There is no give and take in negotiation

In any financial negotiation, both parties should be able to give and take a little. If you put in an offer below asking for repairs, be prepared to have many requests for repairs denied. If you offer to shorten the escrow to 30 days from 60 days to help the sellers out, they should be flexible in allowing you to schedule inspections and appraisals.

If you find you are the only one giving: you put in an offer over asking, you rearrange your schedule multiple times for inspections because sellers aren’t flexible, the sellers deny major requests for obvious repairs, the sellers refuse to negotiate contingency timelines, etc., then be cautious.

If possible, you want this transaction to be cordial and efficient. If you are met with resistance at every turn, you may want to reconsider before lifting your contingencies. Difficult sellers can make the home-buying process a nightmare.

Too much deviation from the boilerplate in contracts

Most real estate transaction documents are going to be very standard. If your sellers modify the contracts, even legally, and add addendums, be wary. What are they trying to accomplish that is different than the standard? Are they trying to confuse you? Are they trying to build in a loophole?

Also, ensure you read and understand every word of your contracts. Look for anomalies that may differ from your verbal discussion with your agent. I recommend having a real estate attorney review and explain documents so that you know what you are signing. A conveyancer will help handle the legal process of transferring property ownership from a seller to a buyer well. 

Even with the most easygoing transaction, buying a house is stressful. Therefore, keep your eyes open for these red flags that might mean this isn’t the right house for you. Trust your gut and look out for yourself.

I’ve created a card for you to carry in your wallet to quickly reference while house-hunting. Click on the image below to download and print.

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