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10 Common Homebuying Red Flags

By Dana Webb · February 08, 2024 · 7 minute read

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10 Common Homebuying Red Flags

You’ve been getting up early weekend after weekend to go to open houses and have spent hours looking at online listings. You’ve finally found a place that you like, but before you make an offer, one good idea is to do some research on what to look for when buying a home.

Most people don’t want to buy a home that is going to require a lot of work or be difficult to finance because it’s structurally unsound or unsafe. The home might look great on the surface, but it’s recommended that a buyer order the proper home inspection(s) to see if it actually measures up prior to lifting any property contingencies. It can be stressful or even derail the home purchase to find out that you’ll need to make all sorts of costly renovations that make you go over budget or have to look for renovation financing vs. traditional financing, after you’ve worked hard to find that dream home.

Signs Your Dream Home Could Be a Nightmare

There are a lot of things to look for when buying a home. But these are 10 common home inspection red flags that would put even your dream home on the buyer-beware list because of the home repair costs and stress involved in fixing the issues. (Passing the home inspection will also be an important part of getting through the real-estate purchase contract process.) Consider these factors as you continue your search for your new nest, and especially if you’re a first-time homebuyer, lean on professional inspectors for help.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.


1. Structural Problems

If there is a problem with the foundation or load-bearing walls in your new home, structural repairs involving health and safety issues could derail your home loan by making the property ineligible for financing, or could wind up costing thousands of dollars. But structural problems aren’t just expensive to fix, they could also be considered unsafe — which is why they should be at the top of any list of things to check when buying a home.

Look for major cracks in the foundation, problems with doors closing, door frames not being perfectly rectangular, or walls or floors that seem to sag. You’ll want to spend the money for a professional home inspection. If the inspection reveals there is a larger issue, a structural engineer’s report may be able to provide additional insight.


💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.

2. Water-Damage Woes

The biggest cause of rot and mold is moisture. So if your potential new home has leaking pipes or a roof that lets in water, it won’t just be expensive to replace your roof or find where the leak is coming from — the leak could have already created other problems.

Water stains and mold are home inspection red flags. Not only can mold have implications for your health, it could indicate a bigger problem with the house. If you see either of them, look into the cause of the stain, because a new roof or new plumbing could set you back a significant amount of money. Dry rot and related problems like mold can also fall under health and safety issues and, as a result, affect the home’s eligibility for most types of home mortgage loans.

3. Poor Drainage

Poor grading and drainage can potentially cause huge problems with the foundation or basement of your home, so it should be high on your list of home inspection red flags. When it comes to bad drainage, things to look for when buying a home can include but are not limited to: pooling water around the foundation; leaking in the basement; gutters that are blocked or overflowing; and soil being moved by water in any flower beds around the home. While there are ways to fix poor drainage and improper grading if it’s minor, you might struggle with larger drainage problems if the home is in a low-lying area.

4. Bad Plumbing

The last thing you want is for your sink to spring a leak. Plumbing problems could have an array of causes, including improper installation or older pipes that need to be replaced or are leaching metals into your water supply. Plumbing that regularly leaks could cause water damage, which, as noted previously, could have some pretty serious consequences (like mold and rot). The home inspector will generally test the plumbing system, but as you look at houses, be observant and try running all the faucets and flushing the toilets. Keep an eye out for any signs of possible water damage and be aware of any funky smells.

5. Pests

There are a few ways to avoid buying a pest-infested home, such as having a home inspector look for pests. If the general home inspection calls out pest issues, it is recommended to go a step further and request a pest inspection report from a licensed pest inspector.

If the inspector finds signs of bugs, it might be possible to request that the seller fix the infestation before you close the house. Sometimes, pest infestation can mean a significant discount, which may be appealing to some buyers. But getting rid of certain kinds of bugs can be very costly, complicated, toxic, and even require you to leave your home while the fumigation takes place. So the discount may not actually be as rosy as it seems. Lenders do not usually close on a traditional home loan with a serious pest issue because it may present a health and safety issue.

6. Electrical Problems

A general home inspection will cover basic electrical items, but some buyers opt for an additional electrical inspection. Depending on when the home was built, there could be improper or even dangerous wiring throughout the house. That could affect eligibility for home financing due to health and safety issues, increase the fire risk in your home, or affect how you budget for buying the house.

7. Neighborhood Troubles

You might have found a beautiful home, but what if the location isn’t ideal? If your home is in a neighborhood that has a high number of vacant properties, a high crime rate, or a poorly rated school system, your investment might not pay off. Ask your real estate agent and neighbors about the neighborhood, stop by at different times, search for the area’s crime statistics, and check out the reputation of local schools.


💡 Quick Tip: Not to be confused with prequalification, preapproval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for preapproval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.

8. Homeowners Association Problems

If you’re moving into a development with dues, you’ll want to know more about the homeowners association (HOA). Your lender will likely require you to obtain a completed Homeowners Association Questionnaire, and once this form is completed, it could answer many of the questions you may have, such as: How much are the HOA fees? What are the rules around making changes to your property? Is there any pending litigation against the condo association? Can you rent out your place or use it as an Airbnb when you go on vacation? Before you put in an offer, it’s a good idea to find out the answer to these or any other issues of importance to you and your family.

9. DIY Improvements

Watch out for shoddy renovations. If the house looks like it has undergone a recent facelift, have a close look at the workmanship. If there are visible shortcuts, there may be other areas of the house that weren’t properly renovated that could cause you headaches in the future. Check them carefully and make sure the major improvements or additions were done with the proper permits.

10. Older Windows

Older windows could translate into higher heating and cooling costs for your home. Moisture leakage can cause mold issues over time. Those costs add up, so you’ll want to add windows to your list of things to look at when buying a home. On your house tour, look for windows that stick, have discoloration around the indoor casing, or are warping. Updating windows (or replacing them completely) could be costly.

The Takeaway

In certain situations, a buyer may consider making an offer on a house even with one or two of these home inspection red flags. But before committing to a property that needs TLC, you’ll want to add up what the potential repairs may cost. Doing the math now could mean fewer financial surprises when you move in. And in some cases, it may be possible to negotiate with the seller so that major issues are addressed before the closing.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.


Photo credit: iStock/Jitalia17

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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