7 Houses You Should Never Buy
I’ve bought and currently own a lot of homes. Between my personal experience and what I see every day showing homes to clients and doing home inspections, I’ve got a list for you of seven homes you should never buy. Stick with me because I have tips for how to mitigate the problem or how to spot some of these house types. It is not always immediately obvious. It’s not all bad news here. I’m going to let you in on a secret near the end: One gem of a home that if you find it, you should absolutely buy it. It’s totally contradictory from a lot of advice you may hear. Along the way, I’m also going to throw water on what other real estate “experts” warn about when they say to never buy old homes.
A House with an Insurance Loss
Homeowner’s Insurance is a huge deal right now. Have you happened to notice this crazy weather we’ve had in the past decade? Well so has your insurer. Insurance companies have been paying out unbelievable claims for damage from all the various natural disasters we have experienced. Couple that with rampant insurance fraud and the problem is catastrophic.
Insurers decided to get proactive instead of reactive. There are companies that will drop you if your roof is over a certain age. Even if it doesn’t leak, they may not renew your policy. This means you either have to find other insurance that will take you, which of course will cost more, or you have to replace a roof that may have some life left to it. Fifteen years for a regular asphalt shingle roof is about the cutoff where some insurers say “Get a new roof, or get a new insurance company.”
If a loss was ever paid on a home, most insurers won’t touch it. There are homes which may be in perfect condition, maybe even rebuilt after damage like a fire or flood, and still – they won’t be insurable.
If you think you can forego insurance and you have a mortgage, guess again. Your mortgage company won’t let you. They will buy you a policy and make you pay for it via your mortgage payment.
Some states like Florida are in such a crisis that people are either selling and leaving the state or having to go with the insurance company of last resort, offered by the state. However, those companies are usually cost-prohibitive.
Hot Tip: How do you know if a house had a claim paid? Much like a credit report, the insurance industry has the CLUE Report. This report can be pulled to find out what claims have been paid out on a home to any previous owner at any point in time. Our contracts here used to require that the buyer secure homeowner’s insurance within 7 days of closing. Now they state that you have to secure insurance within 7 days of ratification – which is when all parties sign and agree to the offer.
Flips
I’m tired of people calling these flippers “Developers.” Developers actually develop property. They develop land, add value, work out issues with jurisdictions and utility companies, and negotiate with contractors, city or county reviewers and other interested parties in the community. I’m married to one, and the complexity of his job is nothing like what house flippers do.
There are good flippers. They are the ones who will take a house “down to the studs” and re-do everything to include all plumbing and electrical systems. I’ve been in so many flips in DC that when I find a house that’s flipped poorly, it screams it loudly. Flippers put lipstick on a pig, stage it elegantly and hope you don’t notice.
Hot tips coming at you: How can you tell if it’s a crappy flip? Flooring is new but uneven? Problem. I’ve said this line 100 times but if the backsplash is crooked that’s not a problem but it’s a problem. Anything new that was touched and re-done should be perfect. Straight, level, in perfect condition. Not crooked, not uneven, not done with cheap materials.
Another way to tell – Are there permits? Most jurisdictions have a way to look up permits online. See what’s been pulled and if they are final and closed. Also, not all jurisdictions operate equally. There are a couple counties in the DC Area where permits mean nothing. Contractors either don’t get them and there’s no repercussions or the government is so lazy that they don’t stop illegal construction or enforce standards.
When you buy a home, there should be receipts from tradespeople that the seller should provide. Their crew will have handled the general renovation to the house – demolition, drywall, painting and potentially structural issues. Specific items like the roof, plumbing, electrical, heating and cooling systems should have been completed by those tradespeople. There should be receipts and warranties that will convey to you.
1980’s Construction
There are a few time periods of construction I hate. The 80’s are my #1 time-period to avoid. My parents owned two different condos built in the early to mid 1980’s. I currently own two condos built in the early to mid 1980’s. Three of these 4 condos between my parents and I have a similar story that goes like this: Developer built the condo building, ran out of money, cut corners at the end. Forty years later people are still dealing with fallout. Water intrusion and spalling are the two most common issues we’ve experienced.
Why did this happen? I went on a witch hunt to figure it out. In 1981, the Economic Recovery Act was passed which made real estate into a great tax shelter for people. A lot of foreign investors came to purchase property in the U.S. Money supply grew, and lending was going wild for banks. In 1986, tax reform eliminated the tax shelters. Even though someone shut the music off, the party kept going. Banks kept lending. Savings and Loans crashed, rents began to fall, and the money spicket was cut off.
Most everything that was built was thrown up quickly so they could keep moving and make money on the next project.
My parents sold their two properties. I still own my two 1980’s, legwarmer, rubiks cube specials. One is a problem. The other has been managed well and seemed to be okay but we’ve got a meeting this week to discuss a “special assessment.”
Remember Surfside – the Champlain Towers Collapse in Miami? 1981. That’s all you need to know. Your hot tip on this issue is this – There’s almost no way around it. Early to mid 1980’s construction should mostly be avoided.
A Rundown Rental House
Poor house. It’s not its fault that the owner is a slumlord. Much like an Enterprise Rental Car, lots of abuse is doled out to rental homes. And owners tend to not keep the homes in peak condition. We have what I call a “group house” next door. The owner is never around, and she rents the house to four unsuspecting young professionals. She turned her garage into a bedroom to get more rent and her contractor, if you could call him that, just lay plywood across some beams. Water was pouring into the garage under the floor until it finally flooded. Then came the mold.
We unfortunately share a chimney with this b*tch. The liner needed to be replaced and she refused to do it. So we had to pay. I don’t expect she will ever reimburse us because she sucks. I hope she sells it soon but I expect that she won’t as long as she can milk the money out if it while doing minimal repairs.
If you find a great house that was a rental and you want to buy it – great! But get all the home inspections possible and be prepared to negotiate hard for the major systems and big ticket items.
Hot Tip: One of the telltale signs a house is a rental? All the bedroom doors have locks on them.
Houses with Deferred Maintenance
Did you know I’m psychic? I can tell you right now what homes in any market are going to have the most deferred maintenance. The ones built between 2000-2010. Most of these homes still have the original everything. It seems like the owners decide to sell instead of replacing things. And because we’re 15-25 years out from the build date, I can guarantee you that everything is going to fail at one time. After houses cycle that period of time, owners tend to replace things as required. So a house built in 1995 for example, has probably already had a roof replaced and a new HVAC.
One or two things needing repair or replacement is to be expected. But all the Big Ticket Items – Roof, Plumbing, Electrical, Heating, Air, Water Heater. Don’t do it. I always say, “Don’t make YOUR problem, MY problem.”
You may not know that everything needs repair until you do a home inspection. But believe me, and here’s your hot tip – spending a few hundred dollars on a home inspection and walking away is cheaper than spending a few hundred thousand for a house that needs new “everything.”
Wet Basement
If a house currently has or has ever had water in the basement, you are pretty much guaranteed that it will always be a problem. You will hear all kinds of reasons but all I can say is that no matter how much regrading of the outside, how many sump pumps are installed, how much waterproofing has happened, don’t buy it.
Hot Tip: How will you know if a house has a wet basement? Look for the dehumidifier in the basement. Look in the closets, and in the garage. You’ll find it. It’s always there somewhere.
Stupid Yard
Finally, don’t buy a home where the backyard goes uphill, so the low-end is close to the house. Here’s something you can always count on with water. Water comes downhill to look for the lowest spot to land. That will be right against the foundation of your house. And if that’s not bad enough, you won’t be able to go outside for weeks after rain or snow, because there will be a mushy moat right outside your backdoor.
What’s the good news? And what should you not listen to other real estate advisors about?
They all love to say don’t buy “Old Homes.” They are all clearly using the same AI to write their video scripts. People who say to not buy old homes don’t understand old homes. Houses will never be built like they used to. I live in a 1930’s home and I love it. Yes, the plumbing and electric has been updated. Yes, we had to add central air conditioning and remove an oil tank to convert to gas. But it’s all brick which is impossible to find on new homes now. Brick insulates unbelievably well. We have original wood floors and gorgeous trim that thankfully no one painted white.
Old houses are amazing. The structure and the “bones” as they say have stood the test of time. Yes it can be very sexy to buy a new home, but the charm and solid construction, use of real hardwood floors and brick, radiator heat – I wouldn’t trade it for anything.
Finally, I promised to tell you the one home type you should buy as soon as you walk into it?
It’s the home people always call the “grandma home.” The curtains, carpet, and furniture with plastic covers on it are usually the giveaway. There’s been no renovations since it was built in the 50’s or 60’s. This is the house you want. It’s solid, built well and hasn’t been destroyed by a parade of various owners with bad renovations over the years. You have a fresh canvas on which to make your new home into your own.
