5 tips to avoid buying a money pit

I am on a first name basis with my “junk guy”. His name is George. He has a couple of kids, put in a pool last year, and is starting up an English-speaking travel agency in Mexico. By any measure, George is doing well. But he’s also a good guy. After he put his pool in, he used the excess dirt and fill from that project to level out my eroding back yard -at no charge. Which I appreciated, because I bought a money pit.

Just prior to the housing boom in the Tampa Bay area, my husband and I recognized that our rent was only going to continue going up; we could no longer justify not buying a house. After several weeks of searching, we located and purchased a modest home in a modest neighborhood for $140,000. We had both owned homes before, and thought we were doing things the “right” way. We purposely bought in a price range where, if anything happened to one of us, the other could pay the mortgage on their own. We used a real estate agent to help us in our search. We didn’t want anything that would need too much work, although we could handle - and expected - small repairs and paint. Unfortunately, we had far too little understanding – and far too many assumptions – about what we could expect from said agent. Likewise, even though we had the house inspected before we purchased, we made too many assumptions (and had too much faith) regarding the diligence of the home inspector. For that matter, we were also naïve about the type of person selling the house. In hindsight, there were clear warning signs that something wasn’t quite right. But here I am, 4 years later, about $63,000+ in updates and repairs, looking back and shaking my head.

The home passed most of the inspection – the roof was given an estimated 5-7 years, the HVAC and plumbing were deemed acceptable, and the only flag was the electrical. The agent filled out a “request to repair” for the electric and we received a note that it had been done. We obtained our mortgage loan and closed on the house, trusting the experts to protect our interests.

Three months after we moved in, we found out that the roof leaked. Badly. Uncertain of what to do, I called the agent who sold us the house. She suggested I check the home warranty…and I never heard from her again. There were no other options, so we put on a new roof to the tune of $15,000, financed of course. Ouch! Three months after that, the plumbing started backing up. We installed a “clean-out” access in the front yard…another $5000, financed. Then the motor on the garage door opener quit on us. We installed a new garage door and garage door opener…another $3000, financed. And one lovely spring morning, I noticed there was condensation in the meter box…and it was sparking. Yikes!! I called the electric company and they came out and fixed the meter box. That, at least, was not on us. My neighbors were very sympathetic.

In the meantime, we had only gotten as far as painting the master bedroom. The house was dictating what we could do and when. Then one morning I noticed mold around the window in the main bathroom. When I tried to scrub it, the tiles fell off, revealing moisture damage and more mold. I’m asthmatic and mold is always a concern. Plus, I didn’t know if it was just around the window or if it extended into the walls. I may have panicked a bit. We had wanted to eventually update the bathroom anyway, so I gathered several quotes from reputable companies. By that time it was late 2021 and my husband had developed medical issues that affected his balance and steadiness; he had already fallen through the glass-topped coffee table (he came out of that unharmed, thankfully). It turned out that the quotes were all very similar in their first recommendation: gut the bathroom and start over. But we were already feeling the pinch from the prior financed repairs so instead we decided to go with a brand name safety shower insert. The insert was anti-slip and anti-bacterial and they would gut only the shower part, hauling away debris (including the old iron bathtub) and install. That total was $11,000. Financed.

If you’ve been keeping track, we were now on the hook for over $34,000 in repairs to a house we thought just needed paint.

We did paint – we finished the 2nd bedroom and I repainted the kitchen cabinets. The old (very old) privacy fence came down in a storm. We didn’t need the privacy, but we did need to fence the dogs. Not wanting to incur any more large bills, I started to get creative: I had a handyman help me prop the fence back up in one of the side yards so I could let the dogs out. But without the fence, it was easy to see that the prior owner had simply tossed his gardening and hardware trash over the old fence into the easement in the back. Broken flower pots, assorted pvc pipes, buckets, tiles, an old cooler…I planted flowers and called my junk guy again.

2022 was an eventful year. The 1972 era kitchen (with avocado tiles) was really showing its age. My amateurish paint job made little impact: there just isn’t much you can do about an old, yellowed countertop pulling away from its wall. And of course, the bugs loved it. I didn’t. Yuk.

I think of the kitchen as the only thing we updated that I had control over. I managed to find enough available credit on my cards that I could swing a $13,000 upgrade. We gutted the kitchen and plugged holes, closed gaps, and put in a new sink, shiplap ceiling, butcher block counter tops and marine blue tiles on the walls. If you think it sounds gorgeous, that’s because it is gorgeous. Around this time I also starting studying to be a realtor – I had realized that I truly loved looking at home and design options and I spent a lot of my spare time considering tile and paint colors. But my biggest motivator was that I didn’t want THIS to happen to anyone else.

I passed my real estate exam and began working as a realtor myself. With my eyes open now to the job of an agent, I started to see how little our own agent had done for us. That type of agent is called a “door opener”…because that’s all they do. They don’t look to catch things the client might be unaware of or point out possible concerns. They simply unlock the door and fill out the forms. The water stains on my own ceiling were a constant reminder to me of how important it is to have a good realtor. And it made me very protective of my own clients’ interests.

During the kitchen upgrade, we found a leak coming from the second bathroom. Big sigh. We had no idea how long it had been leaking; we rarely used that bathroom and the water coming through was under the shower pan and spreading under the kitchen cabinets. If the cabinet maker hadn’t pulled the old cabinets, we might never have known. I had the plumber simply cap it off, figuring we’d get to it down the road. We had steady income, but another bathroom upgrade was simply not in the budget. At some point in all that the valve to the toilet in the second bathroom broke. That’s usually an easy fix but we were effectively “done” with it for the short term. We closed the door and ignored it.

I started working in real estate and truly enjoyed it. I loved meeting people and getting to know them and what they needed, then helping them find the perfect home. I took time with them and many became my friends. I was working a LOT, but every part of the process energized me. At home, I pulled the ugly mural off the wall in the living room, then the wallpaper from the 2nd bathroom. I started considering paint colors and design again for those spaces. Then (yes, something else!) the outside planter box that shared a wall with the master bedroom leaked under the wall and into the bedroom. It destroyed the laminate flooring. Insurance said we should have known it would do that and denied our claim. We of course disagreed (it was built when the house was built - !!) Frustrating, yes. Very. We pulled up the damaged flooring and cleaned the underlying terrazzo – we lacked time, energy and money to replace the flooring. We planned to do that later, when I had a larger client base and started getting regular commissions.

Then my husband passed away. It was a terrible time: we were very close and he was my best friend. I continued working after his passing but in many ways my heart just wasn’t in it anymore. Eventually I closed out my client list, found tenants for my house, and moved away.

A year later, with my tenants gone, my mother and I started inventorying all the things we needed to do to get the house ready to sell. At the top of the list…more painting and fixing the 2nd bathroom. It turned out that the reason the bathroom had leaked was because there was no pan liner, just a concrete slab. And the slab had cracked. We had to start from the (almost literal) ground up. The renovation company had to sledgehammer out the old slab and sill and install a new pan liner. The shower and both bathrooms were updated with new tile floors and paint. Cost: $6000.

If you are counting, we are now at about $53,000. But wait, there’s more! New paint for walls and those stained ceilings: $3000. Rescreening the back porch plus replacing entry doors (dry rot!) for the garage: $1000. New flooring throughout the house: $6000. All paid for by my mother. But the house looks amazing now - $63,000 later. It has new floors, new paint, new roof, new kitchen and bathrooms. And of course, now that it is finally updated, I’m selling it.

The subtitle of this piece is: How to avoid buying a money pit. The thing is, if you are an investor/flipper, these are the types of homes you’d want: you’d buy low, fix, then resell at a higher price. But we weren’t investors, and we didn’t have large amounts of ready cash or a team of contractors and subs who could come in and fix everything in a week or two. We had not expected to incur so many costs – most of them necessary to maintain the home to an acceptable standard. The equity from the sale will mostly go to pay off those incurred (sunk) costs – it is certainly an open question as to whether it was worth it. So how do you avoid it?

1. Find a realtor you can trust. Don’t go with the one you got off the sign. That is NOT a recommendation. Keep in mind that at present (April 16, 2024), buyer’s agents are paid for by the seller as part of the agreement between the seller’s agent and seller. That means a buyer’s agent is FREE to you. Use that!!

The world of real estate is well aware that most people use the first realtor they come across, whether they met them at an open house or were recommended by their cousin. The fact is, you are working on a significant transaction, probably one of the biggest and most important you’ll make in your life. Pick a good realtor!! It is totally OK to interview realtors and to check their reviews online – in fact, it is imperative.

2. Don’t use a realtor out of their usual area. This isn’t because they won’t do their best for you – if you picked a good one, they will absolutely give it their best shot. But they won’t know the homes and local market and/or regulations as well and won’t necessarily be able to provide suggestions for tradesmen or inspectors etc. outside their usual area.

3. During your inspection period (usually 7-10 days), don’t be afraid to call in a professional. This applies not only to the 4 point inspection (electrical, heating and cooling, roof, plumbing) but any other contractor who might address defects or potential issues you have noticed, like windows or erosion or fencing problems or pool liners. Getting those folks out early could save you a LOT of money later, so as with your agent, make sure you read online reviews and recommendations. Don’t just grab the first person on the list. Look at what other folks have said.

4. Don’t be passive. Again, buying a house constitutes a significant transaction. Read all papers and disclosures carefully. Ask for dates and copies of permits. A good agent will explain the paperwork to you before you sign but you need to take an active part in this process.

5. If you aren’t sure, ask. Ask, look, poke around. Listen to that gut instinct. Make sure you are satisfied and understand what you are buying. Get another set of eyes on it.

And good luck!

“Buying a house is like playing Monopoly, except the game never ends and the bills are real.”