5 Warning Signs a Real-Estate Deal is too Good to be True

5 Warning Signs a Real-Estate Deal is too Good to be True

With home rates and prices constantly on the rise, it can be hard to believe when you come across a deal that seems too good to be true.  While good deals do exist, you should do some research if you come across a deal that has a price so low it seems unreal.

Here are some red flags to look out for that may prove to be your salvation when searching for a home in today’s housing market.

If the seller or agent is being sketchy, trying to rush the sale or provide an incentive to skip a home inspection.  These circumstances are red flags and are considered bad signs when purchasing a home.

  • When there is an incentive offered to skip a home inspection, there is usually something big that is being hidden.  While this is not always the case, one real estate investor suggests having “an inspection contingency because it is your leverage to get out of a deal or negotiate your price lower.”
  • Additionally, if the home is a flip, you should ask for building permits and residential building reports. If any major work is missing the home may not be up to code and may be unsafe.
  • Lastly, check the title. Look for gaps in ownership, recorded quit claim deeds or other oddities in the title. If a title is not done properly you may not be able to get title insurance, which can cause additional problems.

  The home price listing is too low.  

If the house seems too cheap, guess what? It probably is. Deals are not unheard of, but they aren’t a common incentive used to sell. Keep in mind, that prices, especially on bigger ticket items, such as houses and cars – reflect value. If the home is priced low, there may be structural issues.

  • These issues are often found in the roofing or foundation and can be especially costly to fix.
  • Also keep in mind that zoning challenges or large past due property tax bills and association dues could also be an issue that the seller is expecting you to take on. These are not issues you want to take on. Do your due diligence and ensure this is not the case.

Check to be sure the home price is not over-inflated (for instance if you are buying a fixer upper) check the county appraisal district website to see if this is the case.

The house has a questionable history. 

  • For instance if there are signs or a history of repairs not being done correctly – ask for a disclosure packet from your realtor.
  • Check crime stats in the area. If the neighborhood doesn’t have an impeccable history – shy away.
  • If a home has been sitting on the market for a long time, this is not a good sign – see if you can dig deeper and find out why.
  • Check to see how many times the ownership turned over in the past few years. If the number is higher than average, this is a good sign that there are problems.

Simple cosmetic fixes.

 If there are quick fixes. such as paint cover-ups on water damage, spray painted hedges or other issues and “curb appeal”(easy fixes) could definitely be a problem. Look for cracks in both exteriors and interiors, water damage on ceilings or walls, tilting, or rotting. Hire your own inspector for a second opinion if necessary.

Buying in a bad or hard to sell neighborhood.

 When you buy, be sure you aren’t buying in a high risk area including:

Some warning signs you should look out for are:

  • High crime rates
  • High flood risk area (insurance rates will be very high)
  • Number of  vacancies in homes and retail businesses
  • High unemployment
  • One main employer or industry
  • Declining populations.

More specifically if you don’t feel good about the neighborhood, you should not buy there. It will be hard to sell again in a neighborhood on the decline.

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