How to Avoid Buying a House That Ends Up Being a Money Pit
Purchasing a home is a really exciting adventure, but there are some potential problems that you need to look out for. The last thing you want is to purchase what you think is your dream home, only to find out later that you are going to have to sink thousands more dollars into maintaining or fixing it. Some houses appear perfect, but are actually potential money pits, so there are certain things you need to look out for. If you’re lucky, a good real estate agent will alert you to problems that they detect, but they might not see all of the issues. You will need to take specific steps, and pay attention to certain issues particularly carefully, if you want to do your best to avoid buying a home that you might regret later. Here are five steps you can take to avoid buying a money pit home.
1. Consider the neighborhood
Most people think of a money pit home as one that needs a lot of work. However, you can find a perfect home, with no material or other defects, and still have it be a money pit. Regardless of how nice the house itself is, if it’s in a bad area, you risk losing value or having a hard time when you want to resell it. You can usually fix a house that has problems, but you can’t change a neighborhood. If you are comfortable and confident that you want to live in a certain area, even if it is considered a less desirable one and you plan to stay in your home for a while, then you are probably all set.
However, if you only plan to live in your home for a few years or you are unsure of how long you will stay, you should look for a desirable neighborhood. Some of the issues to look out for include an unkempt yard, being too close to a sex offender, or being too close to some types of commercial buildings.
2. Pay attention to expensive items
If you are looking at a home that isn’t new, make sure you pay attention to how old various different items are. If you have to replace an air conditioner, furnace, water heater, or even a refrigerator, oven, or dish washer soon after you close on your new home, you may be facing bills that you are not ready for. In addition, if you have to pay for too many items right off the bat, you might not get your money back if you sell the house within a few years. You should also find out how old the roof is, as that is a particularly expensive cost. New shingles, a new driveway, or extensive landscaping will also add up. You should also factor in smaller costs like wallpaper removal or painting, which might not break the bank but should be considered when you are determining what type of offer you are comfortable giving the seller.
3. Figure out if you really want a fixer-upper
Many people dream of purchasing a fixer-upper and making it all their own. If you or someone you know has the ability to do most of the necessary renovations without hiring help, then this might be the right choice for you. However, this isn’t always the right path to take. First, you have to consider if you will have the time to do the renovations. Can you take time off from work? You also need to determine if purchasing a home that needs a lot of work is really cost-effective; usually if you can save enough by doing the renovations yourself, you will greatly improve the value of the home.
However, if the home is already priced in a comparable way to homes in the area, you might lose money by renovating. You also might find that you are better off purchasing a different home in better shape when you factor in the renovation costs. Lastly, renovations often look easier than they are, and problems arise that sometimes skyrocket the previous estimated renovation costs.
4. Check the basement
An inspector can do this for you more thoroughly later, but before you actually put an offer on the home and hire an inspector, you should look around the basement. Often the basement will show telltale signs of a potential money pit. If you see evidence of past moisture, that should be an immediate red flag (indicators include water spots or stains, a musty smell, or drip lines.) You should also look for cracks in the foundation outside. It is possible that the seller has already dealt with any prior problems, but you should be able to figure this out by asking (and make sure you check the disclosure sheet with your realtor.) If you find fixable issues, you can address them when you make an offer (or after the home inspection if they come out during it), but if you find huge problems, you will want to walk away before making an offer.
5. Get an inspection
A home inspector won’t necessarily catch everything, but he or she will probably catch some issues that you won’t catch yourself. From rotted windows, to cracks in foundation, to even smaller issues like a leaky pipe, usually home inspectors are a good investment. Home inspectors cost different amounts, but you should expect to pay a few hundred dollars, up to $500 or more. Angie’s List users who had comparable standard home inspections reported paying an average of $421.52 in 2013. However, it’s important to note that an inspector should be trained; saving a few hundred dollars by paying someone who won’t do a good job could hurt you in the long run. Many states have no regulations about home inspectors, in which case you can at least look for someone with years of training, and hopefully find useful reviews.
Home inspectors are also important from a negotiation standpoint, because having a written report that details a problem will help you when dealing with the seller and their agent.
You can’t guarantee that you will buy a house that won’t cost you money in the long run, but you can certainly take steps to purchase a home that you will hopefully be able to stay happy in for a long time. There are no perfect homes, but there are certainly homes that are a better investment than others.