2-Minute Money Manager: My House Is a Money Pit — What Should I Do?

Construction Couple
Photo by WAYHOME studio / Shutterstock.com

Welcome to the “2-Minute Money Manager,” a short video feature answering money questions submitted by readers and viewers.

Today’s question is about real estate; specifically, what you should do if your new dream home turns into a hopeless money pit.

Watch the following video, and you’ll pick up some valuable info. Or, if you prefer, scroll down to read the full transcript and find out what I said.

You also can learn how to send in a question of your own below.

For more information, check out “Considering a Fixer-Upper? 15 Ways to Avoid a Money Pit” and “Why Many Owners and Renters Regret Their Home Decisions.” You can also go to the search at the top of this page, put in the words “real estate” and find plenty of information on just about everything relating to this topic.

And if you need help with anything from making extra money to getting a mortgage, be sure and visit our Solutions Center.

Got a question of your own to ask? Scroll down past the transcript.

Don’t want to watch? Here’s what I said in the video

Hello, and welcome to your “2-Minute Money Manager.” I’m your host, Stacy Johnson, and this answer is brought to you by MoneyTalksNews.com, serving up the best in personal finance news and advice since 1991.

Today’s question comes from Bonnie:

“What should you do when your new home turns into a money pit?”

Money pits are everywhere

Last year, a family moved in down the block from me. Like me, they live on the water. And like me, they have a seawall. I heard that when these folks bought their house, they had the house inspected, but not the seawall. That’s a specialty inspection that costs extra.

So, guess what happened? A couple of months after moving in, their seawall collapsed and their dock and part of their backyard slid into the canal. The cost to fix was $200,000.

Even if you’re careful, this stuff can happen. But the idea is to be as careful as possible to minimize the odds.

If you’re already in the pit

If you buy a house, move in and then discover there are major problems, you don’t have a lot of choices.

Choice No. 1? Hire a lawyer and go after the sellers and/or the agent. If there were problems the seller or agent knew about and deliberately covered up, you may have a case, depending on the circumstances and the laws in your state.

But you’ll likely have to prove the agent or seller knew or should have known about the problem and failed to disclose it. In a few states, it’s “buyer beware” and you won’t have recourse at all.

The best way to assess your situation is to contact a consumer attorney. You can find one near you at the National Association of Consumer Advocates website, consumeradvocates.org. First appointments are often free.

Obviously, suing is expensive, and it’s a colossal pain. Which leads us to the best idea: not falling into a money pit in the first place.

How to avoid a money pit

Fixer-upper homes are a good way to build “sweat equity.” In fact, in some places home prices are so high, that’s all you may be able to afford. But whether you’re knowingly buying a fix-up or not, always recognize a home for what it is: A complex creature with lots of moving parts, all which cost a lot of money to fix or replace.

So here’s rule No. 1: The less experience you have, the more due diligence you do.

Rule No. 2: The older the house, the more due diligence you do.

Rule No. 3: The less money you have to throw away on surprise repairs, the more due diligence you do.

Starting to see a pattern here?

How to perform due diligence

First step to take? Get a Comprehensive Loss Underwriting Exchange report — known as a CLUE report — on the house you’re considering. This tells you about any insurance losses that have been claimed against it, including what was repaired and how much it cost.

Also, get in the habit of inspecting everything you see:

  • Check out the foundation: Look for cracks.
  • Inspect the roof: Look for water stains on the ceilings.
  • Look for plumbing leaks under sinks. Use your nose: Are you smelling mold?
  • Use a pencil and look for rot by pushing on trim around the windows.

The best way to remember everything is to get a home inspection checklist. You can find one with an online search.

Of course, you’re never going to buy a house — any house — without getting a thorough inspection from a qualified professional home inspector. So, why do your own inspection? Because professionals cost $300 and up. That means you can’t pay to inspect every house you look at. So, it never hurts to learn a few ropes and do your own inspections first.

And when you do order that professional inspection, be there. Go through the home with the inspector. You’ll learn a lot that will help you the next time you’re house-hunting.

Bonnie, I hope that answers your question. See you all next time!

Got a question you’d like answered?

You can ask a question simply by hitting “reply” to our email newsletter, just as you would with any email in your inbox. If you’re not subscribed, fix that right now by clicking here. It’s free, only takes a few seconds, and will get you valuable information every day!

The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.

About me

I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

Got any words of wisdom you can offer on today’s question? Share your knowledge and experiences on our Facebook page. And if you find this information useful, please share it!

How to find cheaper car insurance in minutes

Getting a better deal on car insurance doesn't have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $368 per year, according to the site, so if you're ready to secure your new rate, get started now.

Read Next
5 Renovations That Can Impact Your Home Insurance
5 Renovations That Can Impact Your Home Insurance

Home improvements can affect your home insurance policy for the better, the worse or both.

7 Ways to Save Even More at Dollar Stores
7 Ways to Save Even More at Dollar Stores

Yes, it’s possible to pay less than a buck for items from a dollar store. Here’s how.

10 Food Staples That Are Easy and Cheap to Make Yourself
10 Food Staples That Are Easy and Cheap to Make Yourself

Making any of these key foods yourself will improve meals — and your budget.

8 Products That Solve Everyday Annoyances
8 Products That Solve Everyday Annoyances

These items put an end to the daily irritations that bug you the most.

13 Brilliant Bulk-Buy Items on Amazon
13 Brilliant Bulk-Buy Items on Amazon

Every household should have these products on hand. Buying them in bulk on Amazon saves you cash.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

This Is the Most Popular Age for Claiming Social Security
This Is the Most Popular Age for Claiming Social Security

Both men and women are most likely to start receiving Social Security benefits at this age.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?
Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?

You could save more than $30,000 by setting aside these costly expenses for just one year.

6 Things You Should Never Buy at Trader Joe’s
6 Things You Should Never Buy at Trader Joe’s

We love Trader Joe’s for plenty of reasons. But think twice about this handful of products.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have these documents that are crucial to their golden years — especially during a pandemic.

Don’t Toss These 7 Household Items — Sell Them
Don’t Toss These 7 Household Items — Sell Them

Here’s how to earn cash as you give new life to these unwanted items.

7 Unusual Ways to Declutter Your Home
7 Unusual Ways to Declutter Your Home

Tired of possessions weighing you down? Here are seven ways to declutter painlessly and effectively.

Eat This Food If You Want to Avoid Alzheimer’s Disease
Eat This Food If You Want to Avoid Alzheimer’s Disease

One type of food associated with the Mediterranean diet offers especially large benefits.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

11 Expenses That Quietly Drain Your Wallet
11 Expenses That Quietly Drain Your Wallet

It’s scandalously easy to overspend in these areas of your life.

The 15 Worst States for Retirees in 2020
The 15 Worst States for Retirees in 2020

Based on dozens of metrics tied to affordability, quality of life and health care, these are not ideal places to spend retirement.

9 Dumb Ways You Are Ruining Your Home Value
9 Dumb Ways You Are Ruining Your Home Value

Homeowners, beware these mistakes that can drive away potential buyers.

21 Things You Should Always Buy at a Dollar Store
21 Things You Should Always Buy at a Dollar Store

Dollar stores have great bargains on both everyday and occasional purchases.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

18 Amazon Purchases That We Are Loving Right Now
18 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

15 Outrageously Overpriced Products — and How to Save on Them
15 Outrageously Overpriced Products — and How to Save on Them

Retailers mark up products by hundreds of times their cost — but you don’t have to pay the premium.

Why Half of Retirees Now Owe Taxes on Social Security
Why Half of Retirees Now Owe Taxes on Social Security

Growing numbers of seniors are paying taxes on their Social Security benefits, but you might be able to avoid this fate.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.