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3 red flags when investing in new-home construction

Here are three things to beware of whether investing in a new tiny home, condo or house.

1. Lack of clear communication. It might be a sign of trouble if the builder or contractor is vague about project timelines, cost breakdowns or other construction details. Always get clear written agreements before taking out loans or handing over cash.

2. Multiple lenders or unfamiliar lenders. Be wary if you're encouraged to take out loans from several different sources or unfamiliar lenders. Stick to trusted sources like a bank or local credit union to keep the process straightforward and transparent.

3. No managed escrow account Watch out for builders who ask for full payment upfront or for money to be deposited directly into their business account. Most trustworthy builders will use a managed escrow account, which releases funds to them as project milestones are met. Without a managed escrow service, you risk paying for incomplete or subpar work.

Katherine Peoples is the founder of HPP Cares, a non-profit that is currently supporting frustrated Multitaskr customers in their efforts to recover losses. She notes that there was no managed escrow service in the Multitaskr case.

“That was the biggest problem,” Peoples told ABC News 10. “It went directly into the business account, and then went wherever it went.”

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Danielle Antosz Freelance contributor

Danielle Antosz is a business and personal finance writer based in Ohio and a freelance contributor to Moneywise. Her work has appeared in numerous industry publications including Business Insider, Motley Fool, and Salesforce. She writes about financial topics that matter to everyday people, including retirement, debt reduction and investing.

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