What does it mean when a property has been RED-TAGGED?
In a nutshell, if a property has been red-tagged, the county in which the property resides has a recorded lien or liens against the property because of a violation that the property owner failed to cure. In some cases, a "red-tagged" property is deemed uninhabitable.
This "red-tag" lien will show up in a preliminary title report, a report that is delivered to the buyer of a property shortly after escrow has been opened. If there is a recorded lien of this nature on a property that you wish to purchase, you can forget about obtaining a loan until the liens have been cleared. Because of this, many red-tagged properties sell for cash at a price that is well below market value.
Here are a few reasons why a home might be red-tagged:
1) Modifications or improvements done without the benefit of permits.
2) Modifications or improvements done incorrectly.
3) The septic system has failed.
4) The septic leach lines have been found to be too close to the well.
5) Grading, excavation or fill dirt activity without permits.
6) Zoning violation.
If you are considering buying a property that is red-tagged, you need to understand the risks involved BEFORE you write an offer. To do this, pay a visit (with your REALTOR® and/or contractor) to the county code enforcement department. They can explain the process of obtaining the necessary permits and work that must be done to remedy the situation.
* Be sure to check with your local REALTOR® to know what "Red-Tagged" means in your area. This blog post is based on what red-tagged means in Sonoma County, California.