So far, we’ve spent the entire book telling you how to buy a home—one that you desire, like, and can afford. Now we take a look at a few instances that scream, “Run away as fast as you can!” We truly hope you will face none of these possible scenarios, but it’s best that we tell you about them so that if you do, you’ll take heed. They frequently portend serious issues in your future regarding a particular house or Realtor if you don’t pay attention to them.

Of course, you want your purchase to go perfectly, from finding the right real estate agent to finding the right home and getting to closing. Unfortunately, though, not every transaction goes smoothly, and not every agent/buyer relationship flows easily. There may be problems with the way the agent is handling the purchase, or you may be questioning his ethics.

Many real estate agents have been confronted with difficult scenarios, and their advice is almost always the same: forget about the house in question. This chapter focuses on potential red flags and what you need to do when something just doesn’t feel right.

When you chose your Realtor, hopefully you followed the advice we gave you earlier in the book. Maybe you got a strong recommendation from a co-worker or family member who said that Joe Johnson, real estate agent from ABC Realty, was the best agent you could ever hope to find, or perhaps you completed your interviews with several Realtors, Joe included, and Sue Andersen outshone all the others by a mile.

Sue might have had more listings in the area you’re considering or far more ads in the Sunday newspaper’s real estate section. You thought, “How could she not be a good agent if she has all of this business?”

Unfortunately, after hiring Sue, you’ve found that everything wasn’t quite as good as it first seemed. You’ve been looking at properties in a number of locations and she shows you a home that she says is “perfect.” Best of all, she says, it’s at a great price in an up-and-coming area.

So you look at the property, visiting it several times to get a solid impression of its pluses and minuses. You think that the home is a possibility, but you have some reservations. The price seems too good to be true if the house is “perfect.” You’re uncomfortable with the proximity to the highway—something you stressed to your agent that you didn’t want. You tell the agent you’re not sure, and she listens, smiles, and says she understands. However, she is aggressive and tells you that it’s a rare opportunity and “you’re going to be sorry if you don’t move on it.” At this point, ask yourself, and definitely ask her, “Why the fixation on this particular home?” and “Why are you pushing for this one?” You need to figure out what her motivation is. True, sometimes your agent believes the home is a real bargain. She might just be trying to encourage you to make a decision so you don’t lose the home by hesitating too long. However, she could also be pushing it because she has a personal or business relationship with the seller or developer.

This could be a conflict of interest. A relationship between your Realtor and the seller is not illegal, per se, and any ethics issue depends on exactly how she represents your interests in the house. If the agent has disclosed this relationship to you and thoroughly protects your interests in all circumstances, it’s not unethical. However, if she fails to tell you up front of her relationship with the owner or developer and “overlooks” her fiduciary ethical obligations to you, there is an ethical issue here and you may wish to discuss the matter with her broker. Also, this is a good reason to consider ending the relationship. Have a serious conversation with her about her actions. Listen to her explanation before making any final decision. If you aren’t convinced by her explanation, look for a new agent.

Most times you won’t have signed any agreement with the agent, except if it’s a buyer-broker agreement. If you’ve signed one of those, as a buyer, your only obligation is to pay the agent’s commission if and when she succeeds in getting you a home that you buy and close on. No house, no obligation—definitely no lawsuit.

Another way your agent can fail you is with inspection advice. Let’s say you finally find a home that looks practically perfect in every way—it has the number of bedrooms and baths you want, it seems structurally sound, it has the amenities that you are looking for, and it’s in a good neighborhood with access to excellent schools and great shopping. This seems to be “the” home for you.

When writing the offer, your agent tells you he doesn’t think it is necessary for you to get inspections completed on the property beyond the basic pest and contractors’ inspections. In a more extreme case, he might tell you that this home is in such great shape that you can feel comfortable making your offer without worrying about inspections of any kind.

You question his advice. Instead of agreeing to condition your offer on the results of the inspections, your agent reiterates that you’re “needlessly worrying about nothing” and that if you “don’t hurry” with your offer, you’ll lose the property. There’s that aggression again, but this time, you trust his experience and decide to move forward.

Unfortunately, proceeding with the offer without any inspections, or with fewer inspections than might otherwise be advisable, could set you up for serious problems down the road. Imagine moving in and finding out that your septic system is broken or the entire roof needs to be replaced. You could be facing tremendous expenses on any problems that crop up after you close on the house. These expenses could run several thousands of dollars. Inspections are vital to your home-buying process, and nobody should try to convince you otherwise.

If your Realtor keeps insisting that you shouldn’t waste any time (or money) on inspections, whether he is referring to any inspections or to supplementary ones that the original inspector may recommend based on his findings, and can’t be dissuaded, you should sever the relationship and find an agent who is more willing to protect your interests.

In another version of this issue, the Realtor keeps insisting against all logic and information to the contrary that you onlyuse one specific inspector. Ask your agent directly why he’s pushing so hard for this one guy. If he can’t come up with reasonable answers—and a few references for him or her—it’s time to move on.

If you don’t already have a mortgage lender and you receive a referral from your real estate agent to a lender or mortgage broker, that’s okay. There’s nothing wrong with her providing you with such a referral. However, there’s something wrong with a Realtor who insists that, as a condition of working with her, you mustobtain your financing from a particular mortgage lender.

Ask her why she’s insisting that you use that lender. Then ask if she receives referral fees. If the answer is yes, the agent is required to disclose this information. Your agent may be placing her own best interests before yours. This is a breach of ethics on her part and is illegal. In addition to breaching her duty to provide you the best service without favoring her own interests, it violates a federal law, the Real Estate Settlement Procedure Act (RESPA), which specifically prohibits such kickbacks in exchange for business referrals. RESPA is a federal law passed to stop anyone in the real estate industry from benefiting by, among other things, referring their clients to mortgage lenders in the industry in exchange for a kickback of part of that vendor’s fee. It is also intended to stop actions by Realtors and lenders that only increase those individuals’ receipts while increasing the buyer’s closing costs for no additional benefit. Violations of the act can result in civil and criminal penalties.

More properly, she should give you that individual or firm’s name, along with at least one alternative so that you make the choice in the final determination. While strict interpretation of RESPA requires only that she not force you to use that one individual as a condition of her representing you, common practice is that she give you two or three references, which can include the one she favors.

If your agent keeps insisting that you must use her lender as a condition of working with her, the solution is simple. Find another Realtor—fast. Be aware that she may feel this way about a particular mortgage broker because he always is able to get the job done, no matter how daunting the buyer’s credit is, or because she has had too many deal killers from other local loan brokers. But get some specifics from her about her insistence. If they don’t ring true, my original advice stands—run!

Let’s say you put in an offer on a house for a price that is at or close to the seller’s asking price, to secure a relatively quick close. However, as we’ve stressed, you also want to protect yourself and include contingencies for inspections and loan approval in your offer.

After reviewing your offer, let’s say the seller has no objection to a loan contingency, but she is opposed to an inspection contingency. She says that her house has “always been maintained at the highest level,” and she makes it clear that if you want the house, you’ll buy it without inspections. This is a very clear warning that there are likely to be serious issues with the physical condition of this home.

If this happens to you and you really want the home, then reiterate your offer, including the inspection contingency request. If the seller still refuses, forget the home. There’s obviously something the seller isn’t telling you, and that would soon become your biggest headache.

The next red flag you see could be the price of the home. Let’s say you find a home that has a price so far below comparable homes in the same area, you wonder if there’s a catch. There probably is. It’s one thing if the house is only a few thousand dollars cheaper than other homes in the same market. However, it’s another thing if the home is more than 25 percent cheaper. Ask your agent to find out why.

It might be simply that the home has been on the market for a while or the owner needs to get it sold as soon as possible for personal reasons. Or the seller might be almost out of time on a short-sale deal or he wants to avoid foreclosure by cutting the price to the bone as an incentive. But it’s also possible that the home has major structural issues and the seller is hoping that the low price will generate a sale anyway. Or something in the local environment might affect his ability to get it sold, so a low price could lure in a buyer. In this latter situation, a good example is that the home you are looking at is on an area bordering a former chemical manufacturing facility. However, the specific home you’re considering not only is part of the bordering neighborhood, but it is the home closest to the now-closed chemical plant, and thus subject to the worst of the effects of the old facility.

While the seller isn’t obligated to say why his price is so low, he is obligated to disclose to you any and all known defects in the property, as well as any environmental issues that may affect the value. Remember, the basic rule on any disclosure is that if something might affect the decision of a willing buyer, it must be disclosed. Clearly, something negative in the local environment fits this category. My own practice is that if I can think of it as a possible issue, I disclose it.

If nothing turns up in any disclosures, you may choose to proceed with the purchase, but be very careful. A major price reduction usually has a serious reason behind it.

If your agent tells you that typically there are three or four homes on the market at any one time in a particular location, and when you are visiting the area you see that about 90 percent of the homes have “for sale” signs in their front yards, this is a red flag.

In some cases, a larger than normal number of homes for sale in an area could be due to the foreclosure crisis as it affects an area, but this won’t be the only reason for an unusually high number of sale signs in a neighborhood. Also, the foreclosure crisis hasn’t hit all areas uniformly.

If there is a general economic turndown affecting the whole region, proceed with caution and due diligence. However, if you are not aware of such a situation and your agent is unable to enlighten you, this may be a good reason to look elsewhere. A good agent familiar with a particular area will be aware of anything serious enough to cause such a mass sale situation, but if she can’t tell you, consider another area as well as another agent.

We discussed earlier in this book how such things as a nearby major highway or airport can depress prices and negatively affect the quality of life in a particular locale. In addition to the expected issues that you would expect with either of these, such as noise, gas fumes, flashing lights at night, and physical shaking from large planes taking off, there are also other issues often not spoken of but every bit as annoying. These are odors.

Near a highway, the odor issue can be as broad as the different types of cargo hauled along the road. If a semi hauling hogs goes past, you’ll know immediately—and probably for a while afterward. If one or more vehicles is burning oil or rubber, the smell can permeate your home for days on end—and as more vehicles in this shape go by, it becomes cumulative.

Airports in their own way are no different. Every time a plane takes to the air or makes its final landing approach, you can smell the JP4 burning. The effect is, like the highway gas fumes, cumulative. The more planes, the more fumes and the more smell.

Let’s say that when you go on one of your neighborhood visits, you notice a particularly unpleasant odor. You hadn’t noticed it before, but no matter where in the neighborhood you go, you can’t seem to escape it. You ask your agent if she knows the source of the odor or if it’s just a one-time thing. She tells you that it is a fact of life in that neighborhood. It is coming from a local manufacturing plant and there’s really nothing you can do about it. She also tells you that some residents claim that after a while you get used to it and don’t really notice it any longer.

If you’re not one of those people who can get used to it, forget about buying that home. The odor could become a health issue and will probably make it harder for you to sell the home in the future.

If your home is located on a hill or is bordered by hills, consider potential problems with landslides. Even small hills can cause slides, given the right set of circumstances. If you discover there have been previous slides on the home’s site or somewhere in the neighborhood, consider looking elsewhere. If this truly is your dream home, get an inspection and analysis by a licensed geological or soils engineer. You may also want to have an inspection by a drainage engineer. Both specialists can tell you how severe the threat of additional slides is, but they’ll also give you the disclaimer that they can’t give you a guarantee. They can, however, recommend remedial steps you can take to protect the home and reduce the risk of slides, such as retaining walls and special excavation. It’s your call, but we recommend you forget the property.

This chapter includes just a few examples of red flags that you might encounter during your home-buying process. The best advice I can offer is to use your common sense and listen to your gut feeling. If something seems wrong and you can’t shake the feeling, forget the property. You’ll avoid having your dream turn into a nightmare.