6 Signs a Fixer-Upper Is a Money Pit
Whether you’re planning to flip it for a profit, develop it as a savvy investment, or fix it up yourself as a starter home, a fixer-upper can offer amazing value at a price point that’s almost too good to be true.
But the truth is, sometimes it really is too good to be true. It’s every homebuyer’s nightmare to buy a house thinking that it just needs a little work — only to find out that that work comes with a five- or even six-figure price tag. Yet this happens all the time! So how can you tell which fixer-uppers are worth it and which ones are potential money pits?
Read on for a definitive list of deal breakers when you’re considering a fixer-upper property.
A Leaky or Damaged Roof
A faulty roof is, in itself, one of the most expensive home repairs of all, often running in five figures for a new roof. Worse yet, if you’re dealing with a leaky roof, you can bet that you'll have even more repairs in store. If water has been coming into the home for an extended period of time, you could be dealing with water damage to rafters, beams, insulation, trusses, and more — basically, to anything sitting under that roof.
Head to the top floor of the property and examine the ceilings. Signs of water damage include:
- stains and discoloration
- bubbled paint
When you look at the actual roof, check for:
- obvious fissures or cracks
- sagging spots
- missing, damaged, or disordered shingles
If you have any doubts, get the roof inspected by an experienced professional. A good real estate agent can recommend someone trustworthy!
Outdated plumbing can be both a quality-of-life and a safety issue.
First, examine the pipes using access panels, checking their color and material. Copper or PVC pipes (usually white or off-white plastic) are often in good condition. Lead pipes (flat gray, made of a soft metal, can be scraped with the tip of a screwdriver or knife) must be completely replaced.
Galvanized pipes (silvery-gray, with hard or magnetic surface) are coated with zinc on the inside. When that coating corrodes, lead can build up and be released into the water. If the galvanized pipes look old, find out when they were installed.
Find out how old the water heater is — if it’s over 12 years old, that indicates that the home’s plumbing hasn’t been updated in a while.
Next, flush the toilet. If it produces a symmetrical whirlpool flush, it’s likely in good working condition. An uneven or roiling flush indicates potential problems with the septic line or sewage line.
Finally, turn on the shower, toilet, and bathroom sink all at once. If the water pressure drops, you may have capacity issues.
Old wiring is inefficient at best, but it can also be a fire or electrocution hazard. Rewiring an entire house is quite expensive, with a complete rewiring job costing around $2–4 per square foot — maybe more if you have to open up the walls.
An easy way to estimate the age of a house's wiring is to check for a fuse or circuit breaker box. A fuse box means the wiring is very old and likely needs a lot of work. A small circuit breaker box could mean somewhat newer wiring, but it may still be obsolete or unsafe. When circuit breakers were first installed, more wiring was run through fewer breakers.
You can also examine the wiring itself. If the wire has fabric or cloth insulation, it’s very old and should be replaced. Plastic-coated wiring is the present-day standard.
Advanced Termite Infestation
Like most problems in life, termites are easily dealt with if they’re caught early. But if they’ve been allowed to fester, you could be looking at irreparable damage.
Termites eat wood, and the fundamental structure of a house — the framing, joists, subflooring — tends to be made of wood. Given enough time, a house will literally collapse from a termite infestation. If you suspect termites in a property, look for leaning walls, sagging ceilings or floors, or termite droppings.
An exterminator can often handle early-stage termite infestation pretty inexpensively. A more advanced infestation will require complex remediation of the structure itself. Consider consulting a specialist — you might uncover a deal breaker.
A Questionable Foundation
Along with the roof, foundation problems are among the most serious issues in real estate.
Start by examining the foundation itself, looking for cracks or fissures. Keep in mind that not all cracks are created equal: Hairline cracks aren't generally a cause for concern, while vertical cracks are the result of routine settling and shouldn’t be a problem unless they’re truly outsized. On the other hand, horizontal cracks or cracks larger than a quarter-inch can indicate serious structural damage and result in leakage or even inward collapse.
A subtler sign of foundation problems can be stuck windows or doors because excessive settling can skew those frames.
If you have any doubts about a property’s foundation, call in a structural engineer and an inspector.
An As-Is Listing
Although listing a house as-is may seem forthright and honest, it can actually be one of the biggest red flags. Sellers may by trying to quickly flip a home they know is fatally flawed.
If a home has enough problems, an appraiser won’t designate it as habitable — which means you won’t be able to get conventional financing on it. That alone can create huge complications — not to mention problems finding financing for the actual renovations.
If you’re considering an as-is listing, have the home carefully inspected, make sure you have full disclosures from the seller (or be prepared for unexpected discoveries), and get several contractors to look the place over and give you quotes on repairs.
As the sale moves along, try to get an escape clause in the purchase agreement so you’re off the hook if repair estimates are astronomically greater than anticipated.