Final answer:
The statement that it's a red flag if the current agreement of sale indicates the seller is not the current owner of record is true. Lenders consider this a significant risk because it may point to potential fraud or legal issues, which could jeopardize the lender's ability to secure their loan.
Step-by-step explanation:
If the current agreement of sale indicates that the seller is not the current owner of record, this is considered a red flag by most lenders. The statement is true. When a lender is evaluating a real estate transaction for potential funding, they perform due diligence to ensure that there are no issues that would affect the security of their loan. If the seller does not legally own the property they are attempting to sell, this presents a significant risk to the lender as it could signal potential fraud or legal complications that could jeopardize the lender's ability to recoup their investment in the event of default. Lenders typically require a clear title to ensure that the property can be used as collateral for the loan, and any issues with ownership can lead to delays, additional costs, or even the cancellation of the loan. Therefore, confirming that the seller is indeed the rightful owner is an essential step in the lending process.