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Spotting and Avoiding Real Estate Red Flags as Homebuyers

December 7, 2024

Buying a home is an exciting time, but also one where you have to tread with caution. After all, even a seemingly inconsequential oversight can come with significant consequences. Ensuring that you have a smooth sailing homebuying experience requires you to learn how to spot and avoid potential real estate red flags. Fortunately, doing this is not as hard as it might seem.

Beware of Fraud

Numbers released by CertifID in the 2024 State of Wire Fraud Report indicate that over one in 20 consumers involved in real estate deals became victims of fraud in 2023. Median consumer losses were in excess of $70,000 per incident, which came in the form of down payments from buyers and sellers’ net proceeds. Further, more than 50% of consumers did not have enough information about wire fraud before they got to closing.

While the real estate and banking industries are committed to combating fraud, nefarious elements continue to look for new and innovative ways to circumvent existing safety measures. In recent years, the U.S. has witnessed a rise in the number of non-owner-occupied fraud cases. This is when fraudsters turn to public records to find rental or vacant land properties with no attached mortgages or liens.

When it comes to avoiding real estate fraud, here are the warning signs to look for before making an offer on a property.

• Free and clear property
• Seller in a hurry to sell
• Seller willing to accept a low offer
• Seller unwilling to meet in person
• Signatures in documents don’t match
• Grammatical and typographical errors in documents
• Seller’s location is unclear
• Seller wants the money wired to a foreign bank account
• Seller wishes to use his/her/their own notary

Why the High Vacancy Rates?

Denoted in percentage, vacancy rates indicate how many properties are available for rent within a specific area. When this number is high, it can indicate a decline in property values as well as unfavorable market conditions for buying a home. Other factors that may lead to a high vacancy rate include:

• Increase in crime
• Unpopular developments
• Economic slowdown
• Fewer opportunities for employment
• Decline in the quality of schools

Keep in mind that high vacancy rates can be misleading in some scenarios. For example, non-local buyers tend to buy property in popular tourist places and leave them vacant. While this results in new buildings that sell out, they do not add to the rental inventory. Given that these owners don’t live in the homes and don’t rent them out by choice, they work in artificially inflating vacancy rates.

A Shaky Foundation

If you ask professional home inspectors, “What is the biggest red flag in a home inspection?” many will go with foundation issues. This is because the foundation serves as the core of a home, and if you spot any signs of trouble here, you might have to deal with considerable structural problems later. Cracks can appear in a foundation for different reasons, which include:

• Poor construction
• Poor drainage
• Plumbing leaks
• Expansive soil
• Soil not compacted suitably prior to construction (soil creep)
• Natural disasters

Signs to watch out for when looking for foundation problems include:

• Cracks in ceilings and/or walls
• Cracks in drywall
• Cracks in concrete
• Exterior wall cracks
• Uneven floors
• Sinking ground
• Sagging ceilings
• Bowed walls
• Cabinets separating from walls
• Difficult-to-open and close windows and doors
• Gaps around windows and doors
• Tilted chimneys
• Dampness in crawlspaces

If you notice foundation issues in a home you wish to purchase, make sure you get a professional home inspector to give it a good look. This is because foundation problems can become serious when left unchecked, causing a house to tilt/lean, and carrying out repairs can become rather expensive.

Nobody Likes Pest Infestation

Of all the red flags to look for when buying a house, this one is particularly important, not only because no one wants to live with mice, termites, or roaches, but also because of the health hazard pest infestation presents. Signs to look for when you carry out a DIY home inspection include:

• Unusual odors
• Droppings
• Nests/hives
• Scratching, scurrying, squeaking, or whining sounds from the walls or basement
• Holes in wooden surfaces
• Discolored wood or paint
• Mud tubes underneath paint layers or wood
• Chewed wires/cables
• Buildup of dirt and grease
• Erosion of soil
• Discarded wings of insects

When you approach a home, check how much distance separates the soil from the home’s bottom lap. Ideally, this should be six inches or more, because any lesser can increase the risk of termite infestation.

Even if you don’t see signs of infestation, you should consider getting a pest infestation inspection before closing. In this case, adding a home inspection contingency clause in your offer is ideal. Depending on the outcome of the inspection, you may decide how best to proceed. For example, if the inspection reveals rodent infestation, you may ask the seller to fix the problem or lower the selling price.

Water Flows Where It Can

Water can cut through most materials, be it wood, stone, or metal, which is why one of the key problems to look for when buying a house is water damage. If the weather permits, try inspecting the house on or soon after a rainy day because this is the perfect time to spot leaks and build-ups. If you ignore water damage, the consequences you’ll have to face in the future include the growth of mold, health-related issues, and structural damage.

If you notice water stains on the walls or ceiling, know that they might indicate leaking pipes or a leaky roof. Other signs to look out for include:

• Paint discoloration
• Peeling paint
• Peeling wallpaper
• Musty odors
• Mold
• Dampness
• Wet spots
• Pooling/flooding
• Bubbling underneath surfaces
• Imperfections in surfaces
• Buckled or warped floors
• Swollen drywalls

It is important to check the attic and basement, and look for signs of leaks under all sinks. You should also make sure that the home’s drainage flows away from the foundation. If in doubt, seek assistance from a professional home inspector.

Plumbing Goes a Long Way

Plumbing tends to run throughout a house, including within walls, under floors, and, at times, even through ceilings. After all, it needs to reach every fixture like faucets, sinks, showers, and washing machines; and it also needs to carry wastewater away. Faulty plumbing can lead to water damage and mold, and carrying out repairs can burn a hole in your pocket.

On your own, make sure you look around toilets and under sinks to check for leaks. However, a professional plumber is in a better position to look at the plumbing’s overall condition. Signs you may look for include:

• Leaking pipes/faucets
• Low water pressure
• Slow drainage
• Foul smelling drains
• Gurgling sounds from pipes
• Water stains
• Damp spots
• Cracks in pipes
• Running toilets

Is the Vinyl Hiding Damage?

You need to be particularly careful with homes that have vinyl siding because it could be an attempt to hide damage. This is because vinyl works particularly well in hiding imperfections like unevenness, small cracks, and rot owing to its texture. While there’s no way of telling what’s underneath without taking the vinyl off, signs of damage or rot in the basement or attic increase the likelihood of damage under the siding. Keep in mind, though, that vinyl typically fails to hide large cracks, structural problems, and water damage.

Why Is the Roof Wavy?

Among other hidden things to look for when buying a house comes a wavy roof. One of the most common reasons for this is improper installation, where the alignment between tiles or shingles is incorrect. Alternatively, it might be because of poor-quality decking that has warped with time, inclement weather conditions, or the roofing material’s natural aging process, as is the case with asphalt shingles.

A slightly wavy roof can also indicate two layers of shingles. While the best method of reroofing homes is to remove the old shingles and replace them with new ones, building codes in some areas permit two layers of shingles, as is the case in New York. While doing this adds unnecessary weight to a structure, it might also void the new shingles’ warranty. Besides, a second layer might be an indication of an unrepaired first layer.

Is the Heating and Cooling in Order?

When you’re buying an old home with a heating, ventilation, and air conditioning (HVAC) system, make sure you check its date of installation because most such units come with a lifespan of 15 to 20 years, after which they typically require extensive repairs or replacement. A faulty HVAC system counts among the top real estate red flags not only because it can lead to steep energy bills and uncomfortable living conditions, but also because it can serve as an indication of how the existing owner maintained the property.

Signs to look for in a faulty HVAC system include:

• Poor airflow
• Grinding, rattling, or loud humming sounds
• Inconsistent temperature control
• Frequent on-and-off cycles
• Foul smells
• High energy bills
• Water leaks

Going through an HVAC system’s maintenance records can give you an indication of its current condition. However, a trained HVAC technician can perform a thorough inspection and identify all existing and potential problems.

The Presence of Environmental Hazards

Depending on where and how old a home you plan to purchase, one of the key problems to look for when buying a house is its exposure to environmental hazards like asbestos, radon, lead, mold, moisture, radiation, water pollution, and sound pollution. Signs to look for include:

• Date of construction because pre-1978 homes might have lead-based paint.
• Inadequate ventilation in basements and ground floors because it can lead to concentration of radon.
• Use of asbestos in roofing and insulation.
• Presence of mold and moisture.
• Water contamination.
• Proximity to continual loud sounds.
• Proximity to nuclear facilities.

While real estate agents are typically aware of local environmental hazards, you can also ask for an environmental search report that highlights any given area’s environmental risks.

What About Real Estate Agent Red Flags?

Moving from the red flags to look for when buying a house to the red flags you need to avoid when selecting a realtor or real estate agent, the one that tops the list is poor communication skills. After all, a real estate agent with poor communication skills might not fully comprehend your needs and might fail to pass on information clearly. It is also important that you ask the right questions. Other signs you need to look for include:

• Poor knowledge of the area. If it seems like you know more about the area in which you wish to buy a home than your real estate agent, you might want to move to your next option. After all, part of your agent’s role is to offer insights into the desired neighborhood.
• Lack of knowledge. Real estate agents need to have in-depth knowledge about the areas they serve and the home-buying process, failing which they might not be able to provide the guidance or information you need.
• If a real estate agent brushes away your concerns, you might have reason to be wary. This is also the case if an agent is being pushy about you exceeding your budget or pressuring you to make a decision.
• Few clients. It’s typically best to avoid part-time real estate agents because they have other avenues to pursue as well. Ideally, you should partner with someone who has extensive experience and a long list of clients. This demonstrates that the agent in question has what it takes to crack deals.

Conclusion

Now that you know how to spot common real estate red flags, make sure you approach the home-buying process in the right manner. In addition, consider contacting a mortgage provider and getting pre-approved for a loan before you begin your search for homes. This way, you’ll know how much a lender is willing to lend to you and you can carry out your search accordingly.