For transaction coordinators, spotting red flags early is crucial to every deal.
Whether it’s a sudden change in client behavior, missing docs or an unusual sense of urgency, these warning signs can mean an issue lurking beneath the surface.
In this post, we’ll review some red flags every transaction coordinator should know and how to handle them.
Download a Free Red Flags Checklist for Real Estate TCs
1. Sudden Changes in Client Communication
Unreliable communication is a red flag in real estate transactions. If a client suddenly stops responding or goes silent, it may mean they’re indecisive, having financial issues, or even fraud.
Watch out for these signs:
- Inconsistent answers: When the client gives different answers to the same question, they’re probably hiding something.
- Ignored emails: If your emails are being ignored, it means they’re avoiding the important topics.
- Last-minute changes: Changing plans at the last minute will disrupt the transaction and means there’s an underlying issue.
Communication style changes can be alarming, too. For example, a client who was always responsive and easy to get a hold of stopped answering calls or messages, and that should raise a red flag.
How to handle communication changes
- Reach out proactively: If communication stops, send a friendly follow-up email or make a call.
- Document everything: Keep a record of all interactions and attempts to contact the client.
- Ask direct questions: Politely ask if there’s an issue or change in circumstances you should know about.
By being aware of these signs and taking action, you can protect yourself and your clients from potential risks. If you’re ever unsure, consult with your team or a lawyer.
2. Missing or Incomplete Documentation
Another big red flag in real estate transactions is missing or incomplete documentation. Altered or incomplete documents can delay the process and cause big problems. The risks are huge.
For example, documents with altered dates or missing signatures can be fraud, and documents that don’t meet regulations can cause unnecessary delays in the transaction. And incomplete purchase contracts can cause disputes between the parties and complicate the deal.
When reviewing documents, make sure to look closely at several areas:
- Purchase Agreements: Make sure every section is filled out. Look for missing initials or signatures on key pages. A small oversight can void a contract.
- Financial Records: Verify all financial documents (loan applications) are complete and consistent. Look for fraudulent loan modifications or altered income statements.
- Disclosure Forms: Sellers must disclose certain information about the property. Make sure all disclosures are fully completed and signed.
Some red flags in documentation should never be dismissed. Missing signatures on any page of a contract or form is a big no-no as it means the party may not have signed off on the terms.
Altered dates are another thing you should look out for. Dates on documents should match the transaction timeline to avoid any inconsistencies.
Additionally, watch out for inconsistent information across documents. For example, the property description and buyer’s information should be the same in all related papers. Inconsistencies here can mean errors or, worse, fraud.
How to handle documents properly
- Double Check Before Submitting: Make it a habit to review everything thoroughly before you submit. This will save you from headaches later.
- Communicate with All Parties: Keep in touch with the buyer, seller and other parties involved to make sure everyone has completed their paperwork.
- Use Checklists: Keep a checklist of all required transactions and check each one before moving forward.
3. Urgency or Pressure from Clients
As a transaction coordinator, you need to be aware when clients are pushing for an unusually quick close without proper due diligence.
Some clients might try to rush the process and skip the necessary steps. Be cautious if they want to avoid inspections, appraisals, or legal reviews. This haste might mean financial distress or undisclosed problems with the property.
Take note of the following behaviors:
- Clients want to wire immediately without verifying details.
- Unusually large cash payments. Large cash can be money laundering.
- Sending payments to multiple accounts, especially foreign ones.
- Buyers wanting to close fast with cash are trying to bypass standard checks.
- Suspicious transactions such as cash sales with unexplained funds or rushed deals without proper documentation.
These could be signs of fraudulent activity, like property flipping with unverifiable increases in property value or the involvement of straw buyers designed to artificially inflate prices.
How to deal with this situation
- Be firm on going through the process: Do inspections and appraisals regardless of the client’s urgency.
- Verify payments: Always double-check wire transfer details and be cautious when handling large cash transactions.
- Communicate everything clearly: Make sure thepotential clients understand the process. It’s also best to talk to the real estate agents if you notice any suspicious actions.
4. Overly Complicated Financing Arrangements
Complex or unconventional financing can hide risks. As a TC, along with other real estate professionals involved in the process, you need to watch for warning signs.
Unusual loan terms can be high interest rates, short repayment periods or balloon payments. These can be hard to manage and mean financial instability.
Multiple co-signers on a loan application is a scary indicator. It means the primary borrower may not have enough credit or income. It’s important to talk about this with real estate agents assigned on the process to check the financial stability of all co-signers.
Last-minute financing changes are also suspicious. If a buyer changes lenders or loan terms right before closing, investigate why. It could be to hide financial difficulties or illicit funds.
You should also ensure their compliance with Anti-Money Laundering (AML) regulations. Financing from unknown or offshore financial institutions might be money laundering. Be aware of the source of funds.
5. Clients Withholding Information
Not being transparent can affect the outcome of the deal and cause legal and financial problems in the real estate business.
For example, when you ask them about their financial situation they give you vague answers and don’t want to share the details. They might say, “Everything is fine”, but never give you the documents to verify that.
Another scenario is when a client doesn’t want to give you the full property history, maybe downplaying past issues like water damage or previous foreclosure.
What to do when this happens
- Ask direct questions: Get clients to explain their financial situation and property condition.
- Document everything: Keep a written record of all communications and note any inconsistencies.
- Verify information: Check the information with third-party sources whenever possible.
6. Property Appraisal or Inspection Discrepancies
Discrepancies in appraisals or inspections can pop up in any real estate transaction. While handling these with clients is not your job, you should be aware of potential problems that could kill the deal.
A big difference between the appraisal value and the offer could mean the property is overpriced or there’s more going on.
Keep an eye on appraisals that come in lower than expected; that means the property is priced too high or there are underlying issues.
When you get inspection reports, watch for major findings like structural damage, mold, or electrical problems. These can be costly to fix and will delay the deal if not addressed quickly.
If your clients are dragging their feet, that might mean they don’t want to spend money on repairs. The agent will usually handle these conversations, but you can help the process by making sure all documents are clear, and all concerns are communicated to the right people.
What to do when there are discrepancies
- Check the documents: Review the appraisal and inspection reports thoroughly so everything is accounted for. This will help the real estate agent talk to the client or other parties involved.
- Communicate with the agent: Keep the real estate agent informed of any problems or potential issues you see. Give them all the documentation and details so they can talk to the clients. Your job here is to support the agent so they have everything they need to fix the situation.
- Follow up: Stay on top of open items by checking in with the agent and making sure things are getting done. Whether it’s repairs, additional inspections or updated appraisals, your follow-up will keep the transaction on track and avoid delays.
By being proactive in communicating and organized with your process, you can prevent these from becoming bigger problems down the line.
Final Thoughts
In the real estate industry, red flags need to be spotted and addressed early for a smooth closing. From sudden communication changes to appraisal discrepancies to suspicious financial transactions, being proactive and organized prevents issues and mistakes from becoming deal-breakers.
As an independent transaction coordinator, you are the bridge to ensuring that all documentation is correct, all concerns are communicated, and the process stays on track. You are an important part of a successful deal.
If you want to stay on top of all transactions and communications with potential clients and real estate professionals, ListedKit can help you streamline your workflow. Protect your deals and clients with ListedKit.
