Before buying a house, you should look out for various warning signs or red flags. As someone who has purchased and sold multiple homes for over 22 years, let me share 10 main warning signs to look for. If you find issues, you need to have them fixed during the contingency period or ask for a price discount if the seller doesn't.
Every buyer must be a thorough home inspector. The last thing you want to do is bid an enormous amount of money for a home and then have to come up with large unexpected costs.
After inspecting hundreds of houses and buying and selling multiple properties over the years, let me share with you some sneaky things sellers deploy to make a house look better than it really is.
The more tips you know before buying a house, the better. A house is likely going to be your biggest financial asset. And if you're going to take out debt, then all the more reason to beware of as many warning signs as possible.
For background: I have invested in real estate since 2003. I own five properties and sold one property. Real estate generates about $150,000 of my annual $275,000 investment income a year so both my wife and I can remain stay-at-home parents to our two children. I've also invested six-figures in Fundrise funds, my favorite private real estate platform for diversification and 100% passive income. As I get older and wealthier, I prefer to invest in real estate more passively.
Warning Signs Before Buying A House
Selling a property is stressful. Anything can happen during the ratification process, especially if you accept a no-financing contingency and no-inspection contingency offer.
Your goal as the seller is to make your property look as good as possible in as cost efficient manner as possible. Therefore, the cheapest and easiest things to do are paint, change light fixtures, clean, and redo the floors. As a buyer, you need to look beyond the cosmetics to see what's really going on.
Everything is generally fixable when it comes to a home. But you need to have a good understanding of how much things cost to fix. These warning signs can easily be discovered by you. You can then hire a professional home inspector to look through the issues as well.
Here are the 10 warning signs before buying a house. They are not the end all be all. If you like the house, just be aware and negotiate the price accordingly. When it comes to property, there's a saying that money is made on the purchase, not on the sale. In other words, negotiating is key.
1) Exterior cracks and tilts.
The inside can smell fresh from that wonderful floor varnish and paint, but problems with the exterior could cost you a fortune if you don't pay attention. Before buying a house, you must inspect the foundation for cracks and title.
Here's an example of a Victorian house in San Francisco that was purchased for $1.45 million. It looks OK, right? But when the owner went to get a permit to remove some decayed siding and a rotted door, he found more serious foundation issues.
Below is what the house looks like a year later. What went from fixing up some siding ended up being a complete demolition of the entire structure! Why? The foundation.
Because very often when you start rehabbing a property, the deeper you dig, the more problems arise. Once you're in there, you figure you might as well replace more and more stuff until you might decide to demolish the entire structure.
Fixing The Foundation Is Very Expensive
If you didn't initially budget to spend six figures destroying the house as a buyer, your financial situation will be seriously compromised.
On the other hand, if you did have plans to sneak a demolition in to save on permit fees to build a massive structure for a flip, then maybe you'll be just fine. Just make sure to have a wad of cash to pay off the building department employee who has to approve your new structure!
Bring a leveler, preferably with a laser pointer. Make sure the cracks aren't much more than 1/4 inch wide. If they are, you should get a structural engineer to inspect. A lot of sellers will attempt to mud over and paint the cracks, so look out for a paint or surface mismatch as well.
2) Ownership history – high turnover is a red flag.
Just like when you see a resume which shows a new job every year, a home with high turnover is also a serious warning sign. I consider high turnover as any home with an average ownership length of three years or less per owner. For perspective, the average length of ownership for a home in America today is about 11 years. You can easily check homeownership turnover online.
It's really hard to truly know what it's like to live in a home until after you've taken possession. My biggest fear about buying my old SF rental property was that it was on a busy street next to the busiest street in all of San Francisco. My then girlfriend and I camped out for hours during the day and evening before making the purchase.
Yet even then, once we took ownership, we discovered we had underestimated the constant honking, rattling manhole cover, and tremors from the traffic. I ended up spending $10,000 for sound deadening windows. They were installed behind the original windows which I also replaced with dual panes for another $10,000.
Having multiple owners in a short period of time is one of the biggest warning signs before buying a house. It should really make you wonder why the previous owners didn't hold the property for longer.
3) Look for water damage concealed by paint.
Water damage is by far the most common damage to houses. Usually, they are relatively straight forward to fix, e.g. reinstall flashing, caulk the gaps, patch the roof, etc. However, sometimes, water leaks can be hard to find. If you conceal water damaged areas with paint, you trap the moisture in the walls that will likely lead to mold. Black mold is unhealthy to breathe.
Look carefully at the underside of drawers and sinks in the kitchen. Look at the base of the tubs and toilets. One of the biggest culprits is the sheetrock underneath window sills. If you see soft or warped sheetrock, you know there are leaks.
Also look for peeling wall paper and bubbling in walls that are underground or backed up to soil. If there is peeling and bubbling, the wall is damp and needs to be opened up and fixed by a reputable company.
During my 10 years of ownership, twice I hired a handyman to cut out the sheetrock, replace with new sheetrock, mud, sand, and then paint. In preparation for my sale, I also did some of my own patching and sanding work as well. Nevertheless, I still had to disclose the leaks in my disclosure package so they couldn't use the lack of information to back out.
Ultimately, you want the source of the water leak fixed from the outside. A seller omitting items in the seller's disclosure package is a red flag. A seller should be as open and honest as possible. But of course, not all sellers are. Buyers must be diligent in reading all disclosures.
Black Mold And Foundation Damage From Water
Black mold, dry rot, and patchy walls are a warning sign the house has a leak. The longer the leak, the more water damage there will be in the interior of the house.
Always ask the listing agent about any potential previous leaks. They must disclose this fact in the disclosure statements. Also, some rain storms are stronger than others.
You never really know how much bad rain and weather a house can withstand until it goes through some severe storms. Hence, it's better to buy a house after experience a particularly terrible winter or storm. If the house is OK, then it stands to reason the house will hold up agains weaker storms.
Over time, pooling of water can also damage a foundation. Look out for standing puddles around the house and puddles close to the foundation. Ask if a house has French drains installed so that water can be whisked away from the house's foundation.
Water damage is the most devastating to a home's safety and value after fire.
4) Too uneven or bouncy floors.
No home is truly level. However, some homes are more level than others due to settling. Bring a marble to an open house and place the marble around different areas of the floor of each room. The older the house, the likely the more uneven the floors. Sometimes a house will aggressively settle, creating a hump in the middle.
Deflections may be costly to fix because you've got to rip out the existing floor, correct the support columns, find a matching floor, and finish it to match the original flooring. And if there are very uneven floors, foundation work might also be needed.
It is natural to have uneven floors for older homes that have settled over time. In fact, an older home where the foundation has settled may be safer than a new home where the earth has not yet had a chance to shift. If the previous homeowner has obviously done foundation work, like install a concrete I-beam and a steal beam for support, you are likely good.
Either way, you need to make sure during the ownership history, the owner has done something to bolster up the foundation. Concrete I-beams and steal-beams are always good. So is earthquake proofing the home.
5) Beware of room fresheners.
Some stinky people wear deodorant or perfume. Therefore, some stinky houses are often sprayed or decorated with scented candles or potpourri. Your mission is to find out whether there is an insidious odor emanating somewhere in the house. It could be a leaky pipe, mold, sewage, cat and dog pee, etc.
6) Beware when music is playing in each room.
The agent/seller is trying to mask the noisiness outside. I know, because this is exactly what I did when I had potential buyers come over. I turned on the central fan to create some white noise and played some music in the master bedroom. Insist that all music and AC be turned off so you can determine the noise level yourself.
7) Areas the seller won’t let you see.
If a seller won’t allow access to the crawlspace or a room in the property until you are under contract, they probably have something to hide. The listing agent should let you see and inspect everything. Otherwise, this is a big warning sign to be aware of.
8) Sellers providing incentives to waive inspection.
There is no reason to waive inspection unless there is something big to hide. Always have an inspection contingency. It is your leverage to get out of a deal or negotiate your price lower.
That said, in a strong housing market, putting in a home inspection contingency may make your offer uncompetitive. Therefore, if you do waive the home inspection contingency, make sure you thoroughly inspect the house during each visit before putting in an offer.
9) No permits for work done.
Doing a lot of remodeling without permits is one of the largest warning signs before buying a house. If the seller hasn't used any permits, what other shortcuts could the seller be doing without telling you?
You should always ask to see the Report of Residential Building Record aka 3R Report. The 3R report is like the report card for your property. If the seller says they added a new deck, the new deck should be in the 3R report. If it's not, then there is a chance the deck was not built up to code. You don't want to mess with safety.
You should have your inspector thoroughly inspect everything that was done without a permit. There are some things that really don't need a permit, such as remodeling a bathroom or changing windows. But for major structural and electrical work, a permit is very much preferred.
The biggest reasons why homeowners don't get a permit are due to cost, time, and ongoing higher property taxes. Personally, I won't buy a home that did anything major without permits. Major items include building a deck high off the ground, kitchen and bathroom remodels, and electrical re-wiring.
10) Spray painted hedges.
Who the heck would spray paint their hedges? It looks so fake. Yet here I was, minding my own business on an afternoon stroll when I saw a realtor do just that. They also bought new grass for their once dead front lawn. Smart on the natural grass, but not so smart on the spray.
Curb appeal is very important. Landscaping ads value to a house, so does a great deck. But they must be done right. If they are taking this shortcut, what other shortcuts could they be taking?
More Warning Signs To Look For Before Buying A House
Thanks to Financial Samurai reader feedback, here are even more warning signs to look for before buying a house. Everything is fixable, it just costs more money and time.
- Visibly rotted wood on the siding/trim
- Wood rot on the deck
- Peeling roof shingles (hard to see from the ground)
- Deteriorating landscaping/retaining walls
- Number and types of electrical outlets and whether the electricity has been upgraded
- Seeing light through a closed exterior door or window means it's drafty
- Doors that won’t fully close
- Slow or clogged drains
- Leaky pipes under the sinks
- Presence of roof and window flashing, which is important for preventing leaks
- Clogged gutters
- Cement sloping toward the house/low spots near the foundation.
- Abestos, especially with old ducts and furnaces
- Galvanized plumbing that is getting rusty or falling apart (copper and PVC preferred)
- Old electrical main and sub panels with old wiring
- Mass exodus from the neighborhood. Don't let a home's curb appeal keep you from glancing down the street
- Bad smells (inside or outside)
- Locked doors and blockades
- Foggy or nonfunctioning windows
The more warning signs you can recognize before buying a house, the better. And if you're looking to upgrade homes, you need to be even more vigilant because you're spending more money.
Be Super Vigilant With Your Home Inspection
Now that you know the warning signs before buying a house, you can now buy with more confidence.
Each time you visit a property you want to buy, put your inspector's hat on. Test the electricity and water. Inspect the foundation. Look at the electrical box and see if it is properly labeled. Bring a marble and a needle to inspect the floors and sheetrock. Look at the ceilings to see if there is any new paint spots. Don't forget to bring a notepad too.
A good disclosure package will highlight all the problems of the property. But it's up to you to verify the problems are what they say they are, and not something worse. Having a home inspection contingency gives you an out. You should make it your mission to find even more problems and use them as leverage when negotiating.
Negotiate On The Purchase Price
After coming up with a detailed list that needs fixing, you've also got to come up with a detailed remodeling budget. This is when you can negotiate on price before ratification or after ratification.
Write a price concession letter if you find too many things wrong with the home. Also write a real estate love letter as well to create a connection with the seller. I've written both types of letters to the sellers for my past three homes. As a result, I've saved hundreds of thousands of dollars in the process.
If you keep detailed records of your finds and present them to the seller, the seller should be amenable to some type of compromise. The last thing the seller wants is for the deal to fall out of escrow.
Also consider your short and long term housing needs. Your forever home may be a great fit now. However, those needs will likely change down the road.
My Previous House Had Deferred Maintenance Issues
Part of the reason why I sold my old rental house was because I didn't want to spend more money fixing it up. The house was on a busy street, so no matter how nice I made it, I knew manny potential buyers would balk at the location.
My kitchen and a couple of bathrooms hadn't been remodeled in 25 years. My HVAC unit was 20 years old. Further, my roof had a couple of weak points, which after 12 years, needed some professional maintenance beyond me getting up there and spraying everywhere with a roof patch. I didn't want to spend $200,000 – $300,000 updating the house, especially because it was a rental.
Although home prices should continue to do well over the long run, I'm happy I sold to reduce my homeownership headaches. The sale proceeds have all been re-invested in completely passive investments.
Inspect A Home Thoroughly
Always take your time to properly inspect a home before buying. Find a professional inspector or someone who is at least knowledgeable about the home construction and remodeling industry. You should be able to go back multiple times to inspect the home, take pictures, and take videos.
Finally, carefully read all the disclosure documents. The seller and the selling agent are required by law to disclose everything about the house that is possibly known. If you want to understand more a particular disclosure statement, simply ask.
Take your time in carefully evaluating a property. A real estate purchase will be one of the largest purchases you will make in your life. If there are other warning signs before buying a house we should know about, I'd love to hear them.
Real Estate Investing Recommendation
If you're looking to invest in real estate, take a look at Fundrise, one of the leading private real estate platforms today. They operate private real estate funds primarily invested in Sunbelt real estate, where valuations are lower and rental yields are higher. Fundrise has been around since 2012 and invests roughly $3 billion for over 350,000 investors.
Another great private real estate investing platform is Crowdstreet. Crowdstreet offers accredited investors individual deals run by sponsors that have been pre-vetted for strong track records. Many of their deals are in 18-hour cities where there is potentially greater upside.
If you want to get more surgical in your private real estate investments, Crowdstreet is a strong solution. I've met the people at Crowdstreet on two separate occasions and came away impressed with their risk-management and product offerings. You just have to do more due diligence if you want to create your select real state portfolio.
I've personally invested $954,000 in real estate crowdfunding to diversify my real estate holdings and earning income 100% passively. Real estate accounts for about $150,000 of my estimated $380,000 in passive income.
So far, I've received over $700,000 in real estate crowdfunding distributions and passive income since 2016. Both platforms are sponsors of Financial Samurai and I am a six-figure investor in Fundrise funds.
10 Warning Signs And Red Flags Before Buying Property is a Financial Samurai original post. All rights reserved.
Most people have ideas, but when you’re buying a house (or making other big decisions) have a real plan. It can also be easy to underestimate the amount of time, energy, and money that keeping a house maintained will require. Run from a house with “deferred maintenance”. Your realtor will recommend a home inspector, but ALWAYS hire your own inspector so there is no conflict of interest! Prepare by doing your research, use the best, and you’ll have a much better chance of receiving an unbiased report to base your decision on. It wouldn’t hurt to read “Poor Charlie’s Almanack” for some thoughts on psychology and rational thinking. “Mr. Blandings Builds his Dream House” is worthwhile too.
When you said, bring a marble and a needle to check the floor and the sheet rock, I know what the marble is for but what is the needle for?
To test if there’s softness/dry rot in the sheet rock.
Awesome list of things to look for; thank you!
Do you think a lot of the risk of these issues can be reduced if you just decide to purchase newer property – brand new or up to 10 years old? What about buying a condo with a property management company that has uniform rules for the owners and takes care of repairs – would that provide additional comfort?
Two items that are worth mentioning… 1) get smart on drain systems, mid 1970’s homes in the US transitioned to PVC which does not corrode. Previously cast iron was the standard, if maintained, cast iron can last a long time, but if you have a bad cast iron pipe sunk in slab, this is a major repair. 2) get smart on termites, especially in California – at least in the coastal areas, due to the weather they never really die. A home may be great in all the areas Sam commented on but the wood can be near hollow.
Excellent and timely article. Just what I needed to hear. Do you recommend doing an official home inspection before making an offer?
Yes, if the seller will accept a home inspection as part of your offer, absolutely do it. It will give you an out or a bargaining chip if something goes wrong.
But every time you visit the house, bring as many people as possible and inspect the place yourself. Take notes and be thorough.
Here I another post worth reading: Why Waiving A Home Inspection Contingency Might Be OK
Purchased a house in Honolulu in 2021 – had a few disclosed foundations issues. Had to weigh the repair cost + discount against passing and risking higher rates and home prices. Went ahead with the purchase – foundation repairs will cost about $60K but in the end I think we made the right decision given where the market is now.
$60K not too bad for foundation work. Glad you’re enjoying your home!
Wish I bought a Hawaii house in 2019 before the pandemic. Coulda! But bought a fixer in SF instead. At least it generations good cash flow.
Why didn’t the RE agent just trim the brown leaves? Oh well. Two other things in older homes: potential asbestos and galvanized plumbing.
Then the plant would look more dead. Tell me more about the problem with galvanized plumbing!
Galvanized plumbing is famous for corroding from the inside out. Was used a lot in the 50’s before PVC.
Got it. Yeah, we removed several galvanized tubes during our remodel as they were eroding.
Any thoughts on copper plumbing versus PVC?
Copper is more expensive and is used mainly for the water supply. PVC, is generally used for the drains and major pipes. PVC is also very easy to work with.
Got it. I hope copper is good because that’s basically all I saw my guys use when the did my downstairs gut remodel!
Sam – you should look into pex plumbing, miracle product, especially for remodels, economics and durability of copper don’t hold up to pex
OK, maybe in the next life. I don’t ever plan to do a gut remodel again.
You should do another one, remodels are where the $ is, all the best property has already been developed long ago, unless you are building on a huge tract of land embrace the demo and remodel!
I have enough. Just finished a gut remodel.
That spray-painted bush is hilarious!
We bought our first house two years ago and it has been a whirlwind of fixing deferred maintenance since then: new roof, new siding, insulation, electrical, landscaping, new water line, gutters, and a lot of caulk. I wouldn’t have called the house a fixer, but it certainly has taken a lot of our time on weekends. Since we mostly DIY it hasn’t broken the bank, but it hasn’t been cheap either. I think there is a light at the end of the tunnel finally.
If I could go back, the things I would look for in addition to your list is visibly rotted wood on the siding/trim, peeling roof shingles (hard to see from the ground admittedly), deteriorating landscaping/retaining walls, number and types of electrical outlets (how does anyone get by with one outlet per bedroom?), seeing light through a closed exterior door or window (drafty!), doors that won’t fully close, slow or clogged drains, leaky pipes under the sink, presence of roof and window flashing, clogged gutters, cement sloping toward the house/low spots near the foundation.
There often isn’t enough time to check everything but it can save you the headache of going through an offer if you find a lot of things on your first visit. Often times we’re too focused on the finishes and not enough on the foundations. Going through this has taught me a lesson about what to look for when we’re ready to move again. I might just pull out our old inspection report so I know what to look for!
Thanks for adding to the list! I will add them to my post to help everyone before buying a house.
It’s good you are a DIYer with the time and skills to do so. Most homebuyers do not!
Great job! How do you check thickness of walls ?
Go to where the door is and measure front the side.
My sister would like to buy a single-family house, and that is why she would like to hire a real estate agent. Well, you made a pretty good point that it would be best to have the property inspected first. It’s a good thing that you clarified here the importance of checking the home for any foundation issues.
My husband and I would like to buy a residential house this year, which is why we would like to buy home insurance too since this may protect us, just in case damage occurs. This article is excellent when it comes to explaining that we must check whether the prospective property has a high turnover. We’ll also keep n mind to scrutinize its exterior for any damage.
I’ve been wanting to buy a newly constructed house, which has three-car garages and an outdoor fireplace. I agree with you that home inspection is mandatory because this will help me determine if the prospective property has decayed siding or a rotten door. You’re also right about the importance of checking whether the sheetrock is still in good condition.
My aunt has been thinking about buying a new home so that she can move and live in a better neighborhood and it can be a lot safer. She would really like to get some help from a professional so that she can find a house that fits her needs but is still within her budget. I’ll be sure to tell her about how taking notice of how often the home changes owners can be really important and indicate if they are any problems or the street is loud.
I’ve been planning to sell my residential home; that’s why I’m having it inspected already, so I will be able to fix any problems right away. I never knew that uneven floors indicate that the foundation of the house must be repaired already. Since my floors are not in great shape, I guess it’ll be best to hire a foundation repair service.
Thanks for the tip that I should diversify the kinds of properties that I’m buying for real estate investment. I’m thinking about buying my second house next year and I think it would be great if I can find one that I can use as a rental home for some passive income. Perhaps I should look into buying vacation homes for my next purchase since my father told me that those tend to appreciate in value at an increased rate.
Thanks for mentioning that sellers may try to turn on noise or a fan to mask how noisy the house is. My husband and I want to start looking at three-bedroom homes for sale because our two daughters have been asking about getting their own rooms for months now. I’m glad I read your article and learned some helpful warning flags to keep in mind as we find an agent and start looking at residential homes for sale!
While buying new property you need to look numerous things which are important however you need to plan at what budget you can buy new house and then for extra things which makes you home as perfect place to live in.
Thank you so much for your advice to look for moisture that could be trapped in the walls. FOr the last few days, my sister has been telling me how much she wants to find her dream home and buy it. I wonder if she should look for surveying companies that can make sure the building is sound before she buys it.
Yes, it would be best to inspect the home throughly before moving in
I like how you suggest to always inspecting a house’s exterior because it can have severe damages on the foundations. My brother told me that he is ready to start looking for a house to buy. I will share this article with him so that he can be careful with the house that he chooses.
It’s interesting to know that one of the things that you consider when buying a house is to find any unpleasant odors that are a sign of mold, sewage, or a leaky pipe. My husband is thinking about buying a house for my mother, and we are looking for advice to find the right house for her. I will let her know about your recommendations to help us find the best house for my mother.
very informative and helpful ,just a question i just moved in a house only to discover the drain is blocked ,im not even a month in this house drain problem it looks like was hidden.
as its only two weeks after occupation can you help please
It never hurts to ask!
Wow I am very impressed with this article and want to thank you for all the details you have listed. i truly believe that you just saved me from making a huge mistake in buying the wrong house. Looking at homeowners history as well as the permits and structural issues along with permit problems causing violations ion the property then having to deal with all of that would be a nightmare. I’m glad I ran into this info! Thank You so very much:-)
You’re welcome! Everybody has to do as much research as possible on one of the largest, if not largest purchases of their lives!
I never thought about looking at the ownership history when buying a home. My daughter and her husband are wanting to buy a home for the very first time and that want to make sure that they buy the perfect ones for them. I’ll make sure to pass this information along to them as they search for homes.
One of my best friends got married and he wants to buy his wife a house. I like how you said that some sellers provide an incentive to waive the inspection. I will advise my friend to make sure to have an inspection before buying the house.