Red (Flag) Alert! Guiding Buyers After Discovering a Property’s Problems – Part 1

Wouldn’t it be neat if when you first arrive at a home for sale there were actual red flags planted in the front lawn warning of ominous issues? It would sure save the time and effort of having to discover them yourself. Perfect world, right? Unfortunately, absurdist humor is just that, so it is often up to you as the residential real estate professional to suss out the negatives for your client’s sake.

It’s not easy. In most states, homesellers are legally required to disclose any known material defects or issues with the property. But that can be a slippery slope, with iffy problems that might have been masked. Some of them might not even have to do with the property itself, such as nightmare neighbors, questionable school systems and more. It’s why buyer agents are absolute musts for smart homebuyers, some of whom will be moving from another state or area and have little to no knowledge of the home’s surroundings and situations.

Before getting to a list of red-flag specifics, Jeffrey Decatur, a longtime broker associate with RE/MAX Capital in Latham, New York, provides a few subtle but particular issues based on personal experiences, starting with duct tape and mysteriously locked doors.

“Typically, duct tape denotes some cordless screwdriver-wielding weekend Mr. Fix-It hanging off a ladder trying to stop a leak in the ceiling,” he says. “There are very few places in a home where duct tape is the answer. 

“Unmarked locked doors are another red flag. We have all shown a home where they have a locked closet or room for one reason or another…valuables, guns or whatnot. Typically, a seller will put a disclaimer on the door explaining the reason for the restriction and explain when it can be seen. If it’s just a locked door with no reason, red flag.”

The right scents also make sense to Decatur.

“Too many air fresheners can be a red flag,” he says. “Have one on each floor maybe. If you are that worried about a smell, there is a deeper problem. Every house has a scent, some more than others, but don’t overdo the air fresheners or scent candles.”

Buyer red-flag issues

When a buyer thinks they’ve found their dream home, it can be hard to come down from cloud nine and check for any potential problems. According to Palm Paradise Realty Group, a professional concierge real estate service, these are the major red flags agents and buyers should look for to avoid wasting time and money.

Electrical and plumbing problems. Old wiring and leaking pipes pose a danger to the homeowner’s safety and the house’s structural integrity. Depending on the scale of the problem, it could come with a hefty bill to fix. Home inspections by professionals can identify these issues.

Drainage issues. Bad water drainage can cause floods inside a house, which can lead to damp, mold and structural damage. If homes are built close together, drainage issues are rarely confined to one property, so bad drainage can often spark conflicts with neighbors as well.

Zoning and usage issues. Zoning laws can restrict what a property can be used for, what changes can be made and how the land can be landscaped (for example, prohibiting cutting down certain trees). If these issues aren’t investigated beforehand, buyers could face legal challenges over changes or be unable to make the changes in the first place. Zoning is also notoriously technical and opaque in many regions, making these issues difficult to uncover—though some advocates are trying to fix this.

Location, location, location. Some location issues are obvious, like being right by the freeway or near train tracks. However, some are more subtle. For example, do people feel comfortable walking around the neighborhood after dark? Are the neighbor’s kids always screaming? Does the family across the street throw loud parties every weekend? Taking a walk around the neighborhood and chatting with people should help when it comes to getting a feeling for the place. 

Avoiding a flood plain. Another location problem that’s not immediately obvious when viewing a house is whether or not it’s on a flood plain. Some states do not have any laws stating that sellers and REALTORS® need to disclose this information. What’s worse, some areas may have recently become more prone to flooding because of climate change or new building work having changed the local land’s drainage situation. Again, asking the neighbors might shed some light on this.

A picky HOA. While some Homeowners Associations (HOA) can be a benefit, enforcing sensible rules that improve the look and community feel of the neighborhood, some HOAs encourage petty-minded residents on a power trip. Other HOAs are so restrictive they dictate the color you could paint the mailbox. Even for a great property, dealing with a power-mad HOA may not be worth it.

Bugs, bugs, bugs. Bug infestations can be very expensive to exterminate and can require several rounds of treatment. Woodworms and termites can also cause structural damage, requiring yet more investment to repair. Worse still, you’ll never be quite sure if they’re really gone. A thorough inspection should be conducted before there’s any discussion of price.

Flips and foundations

Trouble spots can come from places other than the expected. For instance, when a buyer client is considering a home remodeled by a house flipper, Dan Gonen, associate broker with RE/MAX Excalibur in Scottsdale, cautions that it’s important to watch for red flags indicating poor workmanship and cost-cutting measures. 

“Look closely at the quality of materials used, because flippers may opt for cheap fixtures or finishes to save money,” he says. “Signs of unprofessional work, like uneven floors, poorly installed tiles or inconsistent paint jobs can point to rushed or inadequate renovations. Hidden issues may also be a concern, as cosmetic updates could be masking underlying structural problems, so it’s essential to hire a thorough home inspector to uncover potential issues that may be covered up.”

Scott Bergmann, a REALTOR® with Realty ONE Group Sterling in Omaha, Nebraska, explains that foundation issues can be a huge red flag.

“Cracks in the walls or doors that don’t close properly can signal big structural problems,” he says. “It’s something that can cost a lot to fix and might scare off potential buyers. Another big one is water damage. Stains on ceilings or in the basement can be signs of a leaky roof or poor drainage, and that can lead to mold or other costly repairs. Both of these issues can turn into expensive fixes and delay a sale if they’re not caught early, so it’s always worth digging deeper when you see them.”

Gonen notes that in his region—or most other hot weather areas of the country—enclosed patios or garage conversions can raise concerns for homebuyers. 

“Sellers often assume the added living space boosts the home’s square footage, but it can result in the loss of key features like a patio or garage,” he says. “It’s crucial to check if the conversion was done with the proper permits, and if the new area is adequately air-conditioned. If the conversion was done thoughtfully, with a new patio or garage added afterward, it may be viewed more positively.”

For Ana Teresa Rodriguez, founder and CEO of ATR Luxury Homes Group at Coldwell Banker Realty, there are three red flags having nothing to do with the home: 

• Skipping the inspection period. “If a seller is eager to remove the inspection, it’s usually a sign they might not want the buyer to uncover potential issues. Inspections are there for a reason, so it’s important not to skip this step.”
• Seller insists on using their title company. “When a seller pushes for their own closing company, it could mean there are title issues lurking. I always recommend buyers work with their own attorney or title company to ensure everything is in order.”
• Listing price below market value. “A property priced way below market can be tempting, but buyers need to be cautious. Even if the seller says they’re in a hurry to leave the country, with today’s technology, selling remotely is a breeze. It’s worth asking questions and doing proper due diligence—sometimes it’s a great deal, but sometimes it’s better to walk away.”

Pam Rosser Thistle, a longtime agent with Berkshire Hathaway HomeServices Fox & Roach, REALTORS® in Philadelphia, adds that there are also subtle hints of trouble that should cause agent antennas to rise.

“Red flags would be not completing the seller’s disclosure completely or honestly,” she says. “It can also be difficult when the property is an estate with many heirs. Sometimes there are disagreements and even fights over how to price the home, what needs to be done to prepare the home and how proceeds will be split. This is often due to siblings living in different markets, where the pace of real estate sales varies. Another red flag is when there are tenants who don’t know the home is being sold.”

Bruce Henderson, an associate real estate broker with the Corcoran Group, notes that there are red flags that only apply to newer buildings and red flags to look for in older buildings and homes. 

“With new construction, you always have to be conscious of potential leaks because the infrastructure is new and hasn’t yet withstood the test of longevity and inclement weather,” he says. “It isn’t necessarily the quality of the construction; it’s that the water can penetrate in the trickiest spots, and if there is any moisture that gets through, you have a big issue. Look out for any indication of water above you or along the edges and close to exterior walls. 

“The quality of construction is paramount. Check if the windows are correctly sealed and if the doors are closing as they should (ensuring they are not warped). The framing and foundation of the home is crucial. Sometimes new developments have uneven floors and walls that look crooked.”

Check back for part 2 of this story, where we’ll discuss seller red flags and how to address them.