Whether you are buying your first home or a vacation property, purchasing a new house is an exciting time. However, it is important to proceed carefully, as many homes can appear ideal on the surface while hiding major problems underneath.
From structural issues to hidden liens, there are many different elements of a property that could be cause for concern. Here is a list of just some of the financial red flags and safety concerns you should watch out for when buying a house.
1. Financing With Little to No Money Down
With the Federal Reserve’s low interest rates driving housing prices up at an accelerated rate, it may seem like now is the perfect time to buy a house. However, borrowing more than 80% of the value of your new home can be significantly risky as it may leave you financially unstable if the market changes.
2. The Seller Insisting On an Inspector They Know
When purchasing a home in a rural area or small town, it can be difficult to avoid conflicts of interest when it comes to a home inspection. However, you should be suspicious of any seller who pushes an inspector they already know. While most professional inspectors are responsible and committed to inspecting a home without bias, it is still crucial to avoid a conflict of interest in any way possible.
3. A Property That Has Never Been Lived In
While buying a newly built home is often preferable to an older home, it is important to verify any claims made by the seller if the new property is more than a few years old. From zoning issues to incomplete construction, there are a shocking number of cases in which home buyers have purchased a new house that later turned out to be unlivable.
4. Homes That Are Expensive to Insure
Insurance is one of those hidden costs that new buyers often fail to consider until it is too late to back out on a deal. Always investigate the area a home is in as well as the structure itself and look for signs that it may be expensive to insure. Homes located near major fault lines, near the coast, or in areas with a high risk of tornadoes and other natural disasters are typically much more expensive to insure. In some cases, you may even be limited to a single insurance company willing to offer coverage in your area, so always do your due diligence on the natural factors affecting a home’s value prior to making a purchase.
5. A Home With No Contingency Period
When buying a home, always negotiate for a contingency period of at least thirty days. This will give you the time necessary to complete your own inspection, as well as any additional research into the property’s history that may be required before closing on the deal. While it is understandable for a seller not to want to continue paying a mortgage when they have already moved out of a home, you have a right to a comprehensive inspection and time to get to know the property before making such a major commitment.
6. A Seller Without Title Insurance
Regardless of whether or not you are buying an existing home or purchasing one brand new, it is absolutely crucial to protect yourself with title insurance. Whether you are paying cash for a privately sold home or taking out a mortgage, without title insurance, you could find yourself halfway through closing before realizing there is some sort of lien attached to the property which prevents you from completing the transaction.
7. It Seems Too Good to Be True
Above all else, when buying a home, always keep your instincts sharp. While it is possible to be pleasantly surprised by what you find during the course of an inspection, if something does not feel right about the property or its seller, trust your gut and ask for additional information. If the seller or agent is unwilling to provide reasonable facts about the property, it is time to walk away.
With these red flags in mind, you can approach the process of buying a house with greater confidence. And remember, if a house seems too good to be true, there’s a good chance that it is.