When To Walk Away After A Home Inspection
Updated: Oct 28, 2020
The problem with buying a house is you have to kiss a lot of frogs before you find your prince. Sometimes you think you've found your prince and, unfortunately, it turns out, you're still kissing a frog. You may think you've found your dream house but then your inspector goes through, kicks the tires, and discovers the house has serious problems. What do you do? Nothing can be more heartbreaking than walking away from the home you were so excited about after the inspection. You put an offer on it because you fell in love with it. Once you have an accepted offer you start moving in emotionally. You feel like you're at the end of a very long, stressful journey and can finally exhale. It's where you'll live, raise your family, and spend time with friends. All the time and energy you put into saving for a house and then finding just the right one has finally paid off.
Then… you get the bad news. The home inspection has turned up some serious issues. Wood rot, black mold, a cracked foundation, lead pipes, water damage, or any number of other issues that are big enough problems to be a deal-breaker. But, if you walk away now you'll have to pick up the pieces and start from scratch. Begin looking at homes online again. Giving up your days off to drive all over town looking at houses that must've been designed to make the people that lived there unhappy. How long will this new process take and what else will you find? What if this really was the best house you'll find but you're being too picky? You love everything else about it. The school district, the yard, and it's close to work. It's an emotional roller coaster and you just want to get off. You get in touch with your inner optimist. "Maybe black mold isn't as bad as it sounds." This can be a very dangerous moment for buyers because you can talk yourself into making a molehill out of a mountain. Especially for first-time homeowners. There's a pretty good chance this is exactly where the home seller wants you and didn’t mention the leak in the attic on purpose. It's one of the oldest tricks in the home seller's book. If they had mentioned there was a major repair needed in the listing or before you put in the offer you wouldn’t have made the offer you did and wouldn't be so excited about the house in the first place. Now you're making an emotional decision. Even if your home inspector explains it to you in detail, until you run the gauntlet of a major home repair you just can't know what it's really like. What seems like a simple project can take 6 months of living in a construction zone. Get ready for lots of dust, dirt, and noise. Dealing with contractors, missed deadlines, and cost overruns. Unless you have an uncle in construction or know a thing or two about renovation your time and bank account are now at the mercy of a contractor you cold-called from an online ad. Their marketing slogan was, "We fix it fast" but they may not live up to that.
So let's look at a quick rundown of a couple of common issues and the average costs you can expect to pay.
If the mold is less than 10 square feet you can probably do it yourself. However, if it's bigger and you have to hire a pro it typically costs $15-$30 dollars per square foot of black mold remediation. A minor infestation can be $2,000 to $6,000 while a more widespread infestation can be between $10,000 and $30,000 dollars.
The average cost for asbestos removal is $20 to $60 per square foot with the average job being about $2,000. Its use was pervasive before 1979 so if the house you're bidding on is in that age bracket you may want to be prepared for this one. If it's in or on your house it can run $50,000 or more in a worst-case scenario. Due to the significant health effects of asbestos, you'll want to think long and hard about continuing with your home purchase if your inspection finds it. This is almost never a do-it-yourself project so you'll need to go for the professional removal service unless you have experience with removing it yourself. Considering the danger of their job they usually earn about $100 an hour.
Most of your home is made of wood so just about any part of your home can be infected with wood rot. Wood rot is a fungus that thrives on the moisture in wood. If it's outside like a deck or porch it's especially vulnerable but it can be anywhere else inside your home if it isn't sealed properly. So if the siding on the house you're looking at is in disrepair or the roof has underperforming shingles you'll want to take an extra hard look at that for possible issues. If you find only a few planks on the deck that need to be replaced it can cost $250 to $400. If it’s the entire deck or porch you can be looking at tearing the whole thing out and replacing it for $10,000 to $25,000. If your entire roof or an entire side of your house is in trouble this can be a serious structural issue that can be $10,000 to $50,000 or more.
If your dream home sits on top of a cracked foundation it can be a significant setback. Even a minor crack is a major issue that needs to be taken seriously. Hopefully, it's small enough to only set you back a few hundred dollars for an epoxy fill but more likely it will cost, on average, $4,000 or more. Bad situations that involve hydraulically lifting your house can be $15,000 or more. If you plan to spend the rest of your life in this house the precarious situation you're in will always be in the back of your mind.
Water pipes don't age gracefully. They can start to leak causing wood rot and mold. Or even worse can burst and you're looking at major repair bills over $10,000.
Electric Panel Upgrade
Houses built before the 1970s can have out of date electrical systems which weren't designed to carry the electrical loads we need in the modern home. Not only is it annoying but power surges and drops can destroy your appliances and devices. Watching them go up in smoke will be painful and costly. If you need to upgrade your electric panel, wiring, and outlets it can be $4,000 or more.
This is only the tip of the iceberg but, hopefully, this is beginning to give you an idea of how much the problems associated with home repair can cost. Are you prepared to take this on? Financially and emotionally? There are too many other possible problems to list here but you could also find things like a leaky roof, improperly cut or shored up girders, joists, or trusses, a termite infestation that can lead to a complete house tear down, or something like radon which is a radioactive gas that causes lung cancer. It comes naturally from the ground so there's no remediation from that. You either decide to live with it or not. Maybe you moved because your previous home wasn't perfect but now you have a whole new set of problems which can cost from a couple of thousand to hundreds of thousands of dollars and once you close on the house and the papers are signed it's officially your problem. Any money you had set aside for renovation, vacation, or retirement could go straight into making sure the house doesn’t collapse around you. With the price of lumber skyrocketing up over 60% any structural issues are going to cost more than ever and will add a big premium to your home price.
Another thing to remember. The costs to fix these issues aren't part of the home mortgage. You need to have the cash on hand or take out a home improvement loan which is going to be 3% to 15% or more than your mortgage rate so include the interest payments over the term of the loan into the cost of the repair.
So if your only option is to get a home improvement loan here's what you'll pay for a $20,000 loan plus interest over a ten-year term:
• At 6% the interest will be $6,600 for a total of $26,600.
• At 10% the interest will be $11,700 for a total of $31,700.
• At 15% the interest will be $18,700 for a total of $38,700.
Is this house still in your budget? If you're purchasing a house that has major problems when you buy it that will come on top of the cost of the regular repairs, maintenance, and renovations that go into being a homeowner. That had been going up rapidly the last few years anyway but now with the lumber shortage, it's much more expensive. With the average age of a house in the U.S. standing at 35 years and homes in the northeast, like New York, averaging closer to 60 it's important to keep in mind the older a house is the more maintenance and repair you'll need in the coming years.
It can be difficult but homebuyers should be prepared for anything until they've had an inspection. You may need to let the deal fall through or renegotiate after you get the results. The home inspection is another step in the home buying process. Not the last step and until you get through it prepare yourself for the worst. You need to try to remember it may be home sweet home but just about anything in it can break and leave a big crimp in your finances. If the home seller didn't know or disclose a major problem what else didn't they know about or disclose? How many major repairs can your budget take?
It's one of the most important decisions of your life because it's one of the biggest financial decisions of your life. If you know your budget and what you can and can't afford it will be easier to make the tough choices.