The Expert Podcast

If you're looking at buying a residential property, particularly a single-family home, be sure that you're not buying a money pit. You might think, "Well, it's real simple; I just get a home inspection." That's one way of looking at it, and you definitely want to do that. But more importantly, there are things that can make a property a money pit that are either beyond the scope of a home inspection or may be overlooked, especially if you're being asked to waive your home inspection.

There are a lot of things on a house that can cost money but don’t necessarily make it a money pit. For instance, if it needs new gutters, you might have to put on new gutters. If you want to remodel the kitchen because it has outdated appliances, that’s an expense, but not necessarily a money pit. A money pit refers to something that's a chronic, ongoing problem with the house that can't easily be fixed, such as a cracked foundation, defective drainage, or a failing septic system. These are issues that will require continuous attention and will be costly to address. It could also be that everything is out of maintenance and will need to be replaced one way or another.

So, how do you prevent buying a money pit? Certainly, a home inspection is important, but you want to make sure your inspector is looking at the right things. If they’re just nitpicking every little possible improvement or repair—like a leaking sink—this is fine to fix, but it’s not a major issue. What you really need to look for are potential structural problems, such as if someone added a deck that’s not supported properly, or if the piers and foundations of the house have improper drainage, causing water damage. These are things that can easily be missed because they’re not obvious. Many inspectors will focus on minor things like whether electrical outlets are working or if there’s reverse polarity, but they may not look at chronic deferred maintenance or major structural problems that could be present.

Also, consider if the roof pitch is correct for draining water away from the fascia boards. What we recommend is instead of having just a home inspector look at your house, hire two or three contractors. It’s going to cost about the same if you pay an electrical contractor, a plumbing contractor, and a general contractor each to come look at the house. A home inspection might cost you $1,500 to $1,800, depending on your market, but hiring specialized contractors might cost you the same amount for a more detailed inspection.

For example, a general contractor might charge $200 to $300 an hour for two hours of their time, and an electrician might charge $150 to $200 per hour. A plumbing contractor may charge $400 to $500 to come look at plumbing issues. Now, you have experts in those specific fields looking at the house, bringing their experience to bear, rather than just a general home inspector. In fact, even an electrician, who’s focused on electrical issues, may be able to spot other problems in the house. By having multiple specialized contractors come and inspect the house, you’ll get a more thorough evaluation than if you rely solely on a home inspector, who may not have deep expertise in all the areas you need.

In some states, home inspection isn't considered a specialized trade, and the inspectors might not require much experience—sometimes, former employees of building companies can do it. Therefore, it's important to look for chronic issues in the house. You could even have a government permit inspector come out under the premise of applying for a permit, maybe for adding an electrical line, a deck, or a shed. They can evaluate the site as part of that process.

Buying a house isn't just about putting your money on the line for the mortgage, tax, and insurance. You’re also obligated to handle any repairs that arise. There's no warranty on a house, and insurance typically doesn’t cover damage or repairs. That’s why it's crucial to get everything solid before finalizing your decision. Also, ask your insurance company to run a CLUE report. A CLUE report provides the claims history of the property, showing if there were any prior water damage, mold claims, or other issues. This can be very helpful when determining whether the property has ongoing issues that need addressing.

A good contractor can also examine prior repairs and upgrades to ensure they were done properly and uncover any hidden damage from previous work. They can also check things like the insulation in the house to determine if it’s been replaced or if it’s the original material. If it’s been replaced, it might indicate water damage or other structural problems that occurred in that area.

There are plenty of things you can detect during an inspection, especially if you take your time and look closely. Even someone without construction experience can spot obvious problems. One option is to take photos and videos and post them on websites where contractors or even amateur DIY experts can provide their opinions. While some of their suggestions might be off, it can still help you identify potential issues and ask the right questions.

Keep in mind that homes are older than ever in the U.S. resale market, so when buying an older home, you want to ensure you're not stuck with repair costs that go beyond what you expect. If you're paying a hefty mortgage, taxes, and insurance, an additional $10,000 to $20,000 a year in repairs could blow your budget. It’s essential to do your due diligence to avoid any unexpected financial burdens.