Sometimes, buyers can score a great deal on fixer-uppers. Other times, it’s the seller who scores a great deal – by dumping their money pit on an unsuspecting buyer.
When you buy a fixer-upper, you can’t expect to defer your repair costs by buying a home warranty plan and filing a claim every time something breaks. It’s on you to make the renovations, which means you need to know precisely what you’re getting yourself into before taking the plunge.
Warning Signs a House May Be a Money Pit
Keep a skeptical eye out for these warning signs of a money pit as you scout your next house.
1. A Listing That Says “Sold As Is”
The most obvious warning sign is, well, an actual warning from the seller.
If the seller specifies that they absolutely will not make any repairs, you know right away that the house needs repairs. Whether those repairs fall within your budget is another question, and one you better answer before making an offer.
Unless you’re a contractor yourself, find a good contractor (or three) and request quotes before making an offer. Alternatively, make an offer if you’re worried about losing the deal to another buyer, but make sure you have an escape clause in the contract so that you can pull out if the quotes come back higher than expected.
Finally, keep in mind that an appraiser must sign off on the house as habitable as a condition for most conventional and FHA mortgage loans. If it’s not habitable as is, you’ll need a 203k loan, hard money loan, or other renovation financing unless you can buy with cash.
Pro tip: If you need help finding contractors, use a service like HomeAdvisor. They’ve already done the research, so you know the quotes you’re receiving are from quality companies.
2. The Smell of Moisture
Water does terrible things to houses when it’s not confined to pipes and plumbing. From warping to rot to mold, moisture can render homes uninhabitable in a matter of days. I’ve known homeowners whose homes had to be bulldozed and completely rebuilt due to toxic mold.
If the air smells damp inside the home, consider it a giant red flag. Get a mold test done, scour the ceilings for signs of leaks, and check every inch of the basement and foundation for cracks or water. Even something as minor as a slow plumbing leak behind a wall can cause massive mold and rot over time.
The bottom line: Be extremely careful with moisture.
3. Warped Walls
One way moisture can damage a home visibly is by warping the walls. As the drywall absorbs moisture from the air, it swells, softens, and eventually crumbles. Mold sometimes grows, and not always slowly. It can envelope entire rooms in a matter of days in the right conditions.
Consider warping another warning sign that a home may have a moisture problem.
4. Stuck Windows & Doors
Walls aren’t the only thing that can warp from moisture. If your window frames warp, you may be in for an expensive set of replacements. And moisture isn’t the only culprit that causes windows to stick. Structural shifting can also force windows closed, usually with the same result: forced replacements.
If the frames warp or shift enough, you may need custom windows to fit into the space. Or, even worse, you may need to fix the structural shifting itself, which can cost tens of thousands of dollars.
Of course, you may want to replace old, leaky windows regardless to make the home more energy-efficient. But that’s better left optional and not mandatory due to stuck windows.
Watch out for stuck doors as well. While you may be able to fix stuck doors with nothing more than a little sanding, keep in mind that they can also indicate structural shifting in the house.
5. Sloping or Sagging Floors
Sloping floors are another sign of structural problems. If you suspect the floors aren’t even, give them the old marble test: Place a marble on the floor and see if it rolls in one direction or another on its own.
All houses shift somewhat as they age, so sloping or sagging floors don’t necessarily mean a house is falling down. But the less even the floors are, the greater the cause for concern. If you need to replace the framing, joists, or subflooring, prepare for a high price tag.
6. Foundation Problems
Foundation issues rarely prove as trivial as spreading a little concrete over the cracks.
Look not only for cracks but also for bowed walls and shifting masonry. If you see anything that gives you even the slightest pause, bring in a structural engineer or a foundation specialty service.
When they strike, foundation problems can cost tens of thousands of dollars to fix. Always use a specialist contractor to address foundation issues, and always collect at least three quotes to minimize the damage to your wallet.
7. Inward Grading, Poor Drainage & Short Downspouts
Sometimes, foundation problems are the result of shifting and tree roots, but more often, foundation problems come from water collecting next to the house.
The ground around a house should slope away from it so that all water drains outward. When water pools near the house, expect trouble. You can check the slope yourself with a carpenter’s level, a tape measure, and a two-by-four at least 10 feet long.
Place one end of the two-by-four touching the house so it extends out by 10 feet, then hold up the far end so that it’s level. Measure the distance from the bottom of the two-by-four to the ground. You want at least six inches of vertical rise for the surrounding 10 feet of ground, and preferably six inches’ rise for the ground within six feet of the house.
Likewise, keep an eye on the gutters and downspouts. Downspout troughs or extensions should ideally run 10 feet away from the house and a bare minimum of six feet. Fortunately, fitting a downspout extension is one of the easiest DIY home improvement projects you can undertake; just make sure no damage has already been done to the foundation.
8. A Bad Roof
Roof problems aren’t always a matter of patching a leak. Not only might you be looking at replacing the roof, but there could also be damage to the sheathing, trusses, beams, and rafters, which can be expensive to repair.
Even small leaks can prove costly. In my first home, the roof kept leaking no matter how many roofers I sent up to patch, repair, replace, caulk, or glaze. No one could figure out how the water was getting in, yet in it came after every violent storm.
For shingled roofs, look for cracked or missing shingles or a ruffled look to the shingles. Check the ceilings on the top floor for any signs of discoloration, bubbling paint, mold, or other water damage. If you find them, buyer beware.
9. Outdated Wiring or Fuses
Young homeowners may not even know what a fuse box is; that’s how outdated the technology is. If the home has a fuse box rather than a circuit breaker box, you know the electrical system is old at best and dangerous at worst.
Even if the house has circuit breakers, look out for a small breaker box. In the early days of circuit breakers, electricians ran more wiring through fewer breakers.
Then there are wires that are fabric-wrapped rather than plastic-sheathed. Cloth or fabric insulation is a throwback from another era and another sign that the wiring is extremely outdated.
Rewiring a house can cost anywhere from $8,000 to $20,000 or more, depending on the age and size of the house, and the ease of access to wiring and panels. If you have any doubts about a home’s electrical system, bring in a licensed electrician to look it over.
10. Outdated Plumbing
Historic homes are charming. Historic plumbing systems? Less so.
First, check the water pressure when the bathroom sink, shower, and toilet are all flowing. Does the pressure drop noticeably?
Second, watch the toilet flush. Does it drain in a smooth whirlpool, or does it burble and belch? If it’s the latter, you could be looking at septic tank problems or sewage line problems, not to mention weak and unreliable flushing.
Scope out the water heater and ask your real estate agent or contractor about its age and remaining life expectancy. Replacing the water heater isn’t a deal breaker, but an older heater can give you a sense of the last time anyone looked at the house’s plumbing.
Lastly, look behind access panels and check out the pipes. Upscale copper pipes are great; cheaper but modern PVC pipes are generally acceptable. But old galvanized pipes can cause problems, from lead poisoning to rust to leaks and more. When in doubt, ask a plumber for their opinion.
If you’re handy, you can try these DIY plumbing projects to save money on contractors. Just make sure you know before buying the home exactly what plumbing work needs to be done.
11. Termite Damage
Termites can literally bring the roof down by devouring the framing, joists, and other structural supports. Late-stage termite damage is extraordinarily expensive to repair.
The trouble is that these wooden structural supports lie behind the walls and floors where you usually can’t see them. That means you need to look for subtle, indirect signs of termite presence: small pellet droppings, sagging floors, and droopy ceilings and walls.
Termite treatment by an exterminator is not terribly expensive and can cost as little as $500. But replacing the framing and subflooring? That’s another story entirely.
If you suspect a termite infestation, bring in a parade of exterminators, contractors, and structural engineers until you’re confident you understand the full extent of the damage. Catching it early could mean just an exterminator treatment. Catching it late should be your cue to pull out of the contract.
12. High Energy Bills
Ask the seller for copies of the last 12 months’ energy bills. High energy bills in winter and summer are a problem in themselves, of course, but they also indicate deeper problems with the home.
Low energy efficiency can be caused by old, inefficient windows and leaky frames, both of which can be expensive to replace. Or it could mean poor insulation – not an exorbitantly pricey fix if you’re just adding more attic insulation, but thin insulation behind the walls is another story.
Even worse is inefficient or poorly designed ductwork. This risk runs particularly high in older homes since the ductwork was usually either added after the home was built or installed for heat only, not central air conditioning (more on that momentarily).
Granted, the federal government does offer some energy efficiency tax credits, which could reduce your renovation costs. Consider these energy efficiency renovation projects when updating a home, but as with every other item on this list, make sure you know what you’re getting into before buying.
13. No Central Air Conditioning
The cost of central air conditioning goes beyond the condenser unit – which, by the way, is not a trivial cost at thousands of dollars. But your HVAC costs only begin there. Your contractor will need to install fans and circuit boards, and even more worryingly, they may need to modify or even replace the ductwork to distribute cool air properly.
The price tag is enough for many homebuyers to consider window units or skipping air conditioning entirely and using air conditioning alternatives instead.
14. Historic Home Designation
There are many benefits to buying an older home, and homes designated as “historic” can come with tax perks along with their charm. But they also come with restrictions.
For example, historic homeowners usually can’t change the layout or structure of the property in any way. That includes making additions, converting closets to bathrooms, or any other functional updates that change the structure.
And the restrictions don’t end there. When updating or replacing components of the house, homeowners must typically use approved materials that reflect the period style. Windows are a classic example; don’t expect to replace original French windows with modern, standard-issue, double-paned sliding windows. Prepare to spend a pretty penny on historically styled windows, which may even need to be custom-made.
With these renovation restrictions often come lower energy efficiency and higher energy bills. Older homes, especially ones with renovation restrictions, simply weren’t built and designed with modern energy efficiency in mind. Charm comes at a cost.
15. Zoning Restrictions
Homeowners don’t get the last say on what they can do on their properties; the government does. Zoning restrictions can limit the building’s footprint, height, or use. They could prevent you from constructing outbuildings such as an accessory dwelling unit, changing the driveway, or raising rabbits.
It goes to show that unforeseen costs aren’t the only risk when buying a home. You could be entirely prepared for the cost of a renovation, only to discover that the zoning doesn’t allow it. If you have any doubts or concerns about zoning, contact your local government’s zoning office to inquire further.
Like every other warning sign on this list, it’s better to know before you buy than after.
For most of us, real estate is the most expensive asset we ever buy. That means it comes with the greatest risk for losses.
Always order a home inspection when buying residential real estate, whether it’s a home or investment property. Get quotes from several contractors for all needed repairs before settling on the home. And never, ever ignore potential red flags or warning signs. If something raises even the slightest question in your mind, bring in an expert to look at it.
Your goal when buying a house is simple: no surprises.