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Red Flags: Diagnose Them Before the Deal Falls Through

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red flags in real estate transactions

Red Flags: Diagnose Them Before the Deal Falls Through

By Paul Gardner | Industry Topics | Comments are Closed | 18 March, 2020 | 0

It would be great if every real estate transaction went perfectly smoothly from start to finish. Unfortunately, that isn’t always the case. Often, there are issues that arise throughout the process that can delay a closing or, worse, derail a sale. Identifying these red flags early in the process can keep the deal on track.

Here are some of the most common red flags to look for in any real estate transaction.

Trust Deeds

Old trust deeds must be cleared from the public record or steps must be taken to acquire indemnity from the title company that paid it off. This hinders the ability of the escrow company to order a demand from the seller’s lender so the title company can pay off the existing loan.

Property Violations

Violations for things such as breaking local noise ordinances or nuisance laws are attached to the property and recorded by local law enforcement departments. If there are any property violations associated with a property, lenders will want them cleared before allowing a transaction to proceed.  

Lack of Valid Identification

Valid identification is required to complete any real estate transaction. The best way to avoid a situation where the buyer can’t produce proper identification at closing is to check for identification well before the closing.

Bankruptcy

An open bankruptcy against a property can delay closing because the debtor often has to get permission from court to sell the home as well as secure approval from the bankruptcy trustee before closing. 

Too Many Foreign Countries

If a seller is from a foreign country and requests documents be mailed to a different country while money is wired to a bank in yet another country, it’s an indication of shady business. They need to be carefully investigated. 

Encroachments

If a structure on a piece of property, such as a fence, driveway, or shed, encroaches on another person’s property, the buyer’s lender may not want to lend the money for the purchase. The completion of the sale may require an endorsement to the lender’s policy which may be an additional cost at closing. 

Power of Attorney

When a buyer indicates using a power of attorney at closing, it means they could be trying to hide the true identity of the buyer, which could lead to unwanted surprises and complications down the road in the process. 

Notice of Pending Action

Some properties may have pending action against them, which means someone has filed a pending lawsuit that may affect title to the property. Before anything can be done with the property, a legal withdrawal document must be recorded. 

These are just a few of the most common red flags that can show up during a real estate transaction. Being aware of them, catching them early, and knowing how to resolve them is the key to keeping the transaction moving forward. 

Real Estate Red Flags, Real Estate Transactions
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Paul Gardner

Paul’s core practice centers on the examination of title and real estate transactions. He has extensive litigation experience, and has spent several years representing and advising lawyers, real estate agents, and insurance agents in connection with professional liability claims.

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