Watch for red flags during purchase

Last year, before the subprime crisis hit, a home buyer was on the verge of purchasing his first home. His mortgage broker told him that qualifying for a mortgage would not be a problem. After reviewing the numbers of an attractive teaser-rate adjustable, the buyer had second thoughts.

He called a knowledgeable friend and asked her to review the loan documents with him. After fully understanding how much the loan would ultimately cost, he decided not to go through with the sale.

In the residential real estate business, a red flag refers to a condition affecting a property that might be a material fact that needs further investigation. A material fact is something that would affect the buyer's decision to buy or the price they would be willing to pay.

Although red flag is a concept commonly associated with the physical aspects of a property, it's a valuable notion for home buyers to keep in mind throughout all aspects for their home search and purchase.

If more buyers had raised questions about the mortgages they took out during the past several years when lending practices were lax, there would be fewer foreclosures today.

HOUSE HUNTING TIP: It can be stressful. To ensure a satisfying home-buying experience, resolve to stay actively involved in the process. Commit to being hypervigilant.

Watch out for red flags and investigate anything questionable.

Working with an excellent real estate agent will increase your confidence level. However, your agent acts on your behalf and should not make decisions for you.

This applies to sellers as well. Make sure that you work with quality professionals in your area. If your real estate agent or mortgage person doesn't return your calls promptly, this could be a red flag this relationship won't work well for you.

Likewise, if your agent keeps showing you properties that don't match your criteria, you could be in for a frustrating and time-consuming experience.

If you get conflicting information about a property, this could also be a red flag. It might indicate carelessness. Or it could mean that someone is concealing a material fact.

It's a red flag if an inspector you hire to inspect the house you're buying tells you that he already inspected the property for the seller, but you were never given a copy of the report.

Don't make any assumptions. For instance, if there's a downstairs living area with a second kitchen, don't assume you can rent it to a tenant even if the seller has in the past. If the property is located in a neighborhood zoned for single-family residences only, renting the downstairs might be a zoning violation. If you're counting on income from the lower living area, you could find yourself in a house you can't afford if the zoning regulations are enforced.

THE CLOSING: Find out what will be built there before making a final decision.

Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers."