How to Avoid A Money Pit

Quite literally, a money pit.

You’ve done your research, you’ve been to too many open houses to count, and you know what you want. You’ve got your down payment ready, and you’re ready to make an offer. Whether you’re aiming for an already renovated home or a DIY project house, nobody wants to end up with a pile of expensive surprises two months into ownership. Whether a house obviously needs work or looks fresh from its photoshoot, it can be all too easy for home improvement and maintenance budgets to balloon out of control if you overlook some key sources of trouble. Here are a handful of tips to make sure you’re buying some proverbial “good bones” and don’t end up with a money pit.

1. Know a structural problem when you see one.

When walking through a property, keep an eye out for anything that looks out of square. Old houses are notorious for a lack of right angles: walls that slant, trapezoidal windows, uneven floors, etc. Though this is extremely common, it can indicate a problem with differential settlement or damaged structural support elements such as load-bearing walls or floor joists. Most commonly, differential settlement occurs because the foundations carrying the home sink very slowly into the ground over many years, and differing soil densities or erosion can cause this to happen at different rates in different parts of the house. This will result in non-perpendicular joints between floors, walls, and ceilings, making renovation considerably more difficult and messy for you or your contractors.

Though this is most commonly seen in 100+ year old homes, it can also occur in new construction if construction was rushed and the initial concrete foundations were not allowed to cure and settle before the rest of the home was built. This will result in brand new finishes cracking, gapping, and delaminating within just a few years, requiring expensive repairs or replacement. Rushed construction is notorious in Philadelphia and other rapidly redeveloping cities, so be sure to bring a critical eye. Building permits are public record, so you can do your research to find out when construction began on the property you are considering. If it was only three months ago, you might want to steer clear.

Sagging floors can also indicate a hidden problem with the joists supporting them. Water damage, cracked joists, or holes cut for new plumbing can all compromise the structural integrity of floor joists, which could result in future problems with cracking finishes or worse, a collapse. Building codes and inspections are designed to prevent catastrophic events, but not all construction is done with a permit and proper inspections. The first plumber to work on our house had no concept of integrating his work with structural safety, and we had to pay a carpenter to “sister” three floor joists where he cut notches for new drain lines -- removing up to 80% of the material.

Drain line on the left? Correct. Notches cut from the bottom? A collapse waiting to happen.

2. A home is only as good as its envelope.

Keeping the elements outside where they belong is the number one job of a home or building’s exterior envelope. This includes temperature, wind, water….and critters. You’re going to want to make sure to thoroughly inspect the outside elements of a potential home to make sure that they are sealed and intact. Your visual inspection should include the roof and eaves, the windows and doors, the exterior brick or siding, the foundation, and the exterior area ways around the house.

When was the last time the roof was replaced or resurfaced? Is there any water pooling in areas away from the drain or gutter? Make sure to visit during or shortly after a rainstorm to evaluate how the roof and grading around the ground level of the house drain water -- and make sure it is draining off of and away from the house. Water is insidious. If there are any holes in the envelope whatsoever, it WILL get in. Water inside your house can cause damage and staining to drywall, wood floors and structural elements, as well as insulation, and if unable to dry quickly it will eventually mold. I once toured a house that had been put back on the market halfway through construction, and the previous owners had unfortunately begun their work on the interior framing and drywall BEFORE making sure that the exterior envelope was thoroughly sealed and repaired. The roof was leaking, broken windows were plugged with plastic to keep the drafts and insects out, and black mold was growing all over brand new drywall -- all of which would have to be replaced by the next owner. When evaluating a property to live in or renovate, make certain that the envelope has been renovated properly or you will be throwing good money after bad.

Take a look at the windows. If it’s an older home, have the original windows already been replaced? Are they single pane, double pane, or triple pane? Original windows in older homes are often single pane, which will significantly up your energy bill as they freely conduct heat and cold from the outside into your home, and they offer little acoustic dampening of outside noise from the street or neighbors. Newer double pane windows are better, and may last you another ten to fifty years depending on their quality. If they appear out of square (due to settlement mentioned above), you may have problems with drafts and air leakage. Triple pane windows are often used in homes and buildings renovated to the Passivhaus standard, an international standard for energy conservation and airtightness in a home’s envelope and an indicator of premium quality that will provide exceptional comfort and minimal energy use over the life of the home.

Paired with an airtight envelope, insulation is key to thermal comfort and minimized energy use for heating and cooling, but this can be difficult to evaluate if walls and ceilings are enclosed in drywall. Homes built between the 1920s and 1980s were often insulated with loose fill vermiculite insulation in the ceilings and exterior walls, but some may have no insulation between structural brick walls and interior plaster. In these cases, the plaster itself provides a thermal blanket, so if you remove the plaster and lath during renovations you’ll want to make sure you replace it with something else. Loose fill cellulose from recycled paper or batt mineral wool such as Rockwool are great options, but spray foam should be avoided.

Lastly, make sure to inspect the exterior of the house for any visible cracks, holes, or loose brick or stone. If you have a brick exterior, check to make sure that the mortar between the bricks isn’t loose or missing. If it is, you will need to “repoint” and replace the mortar to ensure structural integrity and watertightness. Holes in the wall or eaves can allow birds, squirrels, rats, and insects to make their home in the warm, dry cavities of your walls, which can quickly become an infestation that’s difficult to remove. We once lived in a house for over a year whose walls, floors, and ceilings were home to several families of squirrels, mice, and something I swear was the size of a raccoon. Nothing like a furious fight to the death in the ceiling over your breakfast table.

3. Check the plumbing, all the way to the street.

Not only will water find a way in through the envelope, it will also find a way in through your plumbing. Most older homes were originally built with cast iron plumbing drain lines, which have a lifespan of about 50-60 years. When we bought our 1925 house last year, we noticed after inspections that mold was growing in the basement under the main stack pipe of the house, but we hadn’t noticed it on our first few walkthroughs before making an offer. We quickly deduced that the act of running water during the inspection (the home was unoccupied and the plumbing had been turned off for months before we bought it) had led to the mold, which could only mean one thing: the main stack (vertical pipe collecting all the drains) was leaking. We asked the seller to investigate and repair the problem, and when they opened up the wall they found that not only was the pipe cracked, it was literally in pieces. They partially replaced this pipe and the basement sewer line (horizontal pipe leading from the main stack out to the city sewer in the street) with PVC, but this should have alerted us to an even bigger problem: ALL of the cast iron in the house was of the same age, and ALL of it would need to be replaced.

Though we had planned to have the entire house replumbed in the renovation with PVC drain pipes and PEX supplies, we failed to ask our contractor to take the new plumbing all the way out to street sewer cleanout, and the new PVC stopped at the end of the basement before connecting to old cast iron and disappearing into the ground. Only a few weeks after moving in, we began to notice water pooling at the end of the basement, which we quickly realized was two inches of raw sewage. Not good folks. Fast forward: after hiring two subsequent plumbers to unclog our drain, filing a claim with our home insurance policy, and having a sewage mitigation company out to clean up the mess, we realized we had a serious problem when it was backing up a THIRD time as the mitigation company was packing up their equipment to leave. The third time did the trick, and after this unclogging we had our sewage line snaked with a camera -- a service that would have cost us only $100 to do during inspections, way back when we bought the house the summer before. Where our former heating oil tank had been sitting on the concrete slab above the pipe, the 93-year-old pipe had developed a “belly,” or a low spot, which was collecting debris, tissue, and solids (ugh, yes I am writing about poop here) and causing our pipe to back up repeatedly. We would need a full replacement -- requiring a crew of guys, a massive hole in the ground, and over six thousand dollars. Learn from our mistake friends, and make sure to camera your sewer line BEFORE you make the offer. If you do find a problem, you can either ask the seller to fix it, factor it into your renovation budget, or walk away.

A six thousand dollar hole in the ground.

4. Consider the HVAC system.

I could write an entire post on just the HVAC system (and I probably will soon), but for now, let me just say that this single system is probably THE most cost-impacting choice you will make about your home. Whether using the one you’ve got or replacing it with a new one, the HVAC system has massive money implications. An inefficient system, such as oil heating or a conventional forced air cooling system, can be incredibly costly to operate over time and this will be exacerbated by a leaky envelope.

Heating oil, which is used to boil water to be circulated around heating pipes and radiators, can be more expensive to buy than gas for your car and generates wasted heat and fossil fuel emissions in your basement. In our previous apartment (the house with all the squirrels in the walls), we spent over $1500 on heating oil to keep the house warm for one winter from October to April. This house also had an appallingly leaky envelope and trapezoidal, single-pane windows throughout, so a large portion of the heat being generated was also escaping through and around the windows. When we bought our new (old) house, it too had oil heat with radiators, and we ultimately decided to replace this system with a new one and add cooling in the process. Unfortunately, we made this decision before we had figured out what the replacement system would be, not realizing that the system we wanted (geothermal) was well outside the budget we had set aside for the HVAC replacement.

To take a step back, here are several main types of heating systems you are likely to find in a northeast climate and the pros and cons of each.

• Radiators served by a water boiler burning either natural gas or oil. Radiant heat is very warm and comfortable as long as the home’s envelope holds in the heat, but you will feel warmer or cooler depending on proximity to the radiator. Radiators also take up valuable space in the room, and burning fossil fuels to boil the water uses non-renewable resources, generates carbon dioxide, and releases toxic pollutants into your basement and surrounding atmosphere. It is possible to retrofit one of these systems to use a renewable heat source such as biogas or geothermal heat transfer, but they still provide heating only and do not help in the summer.

• Forced air warmed by burning natural gas. Natural gas, though much more cost effective than heating oil (for now), is still a fossil fuel and extracted from the earth using hydraulic fracturing, or "fracking", a process that has been found to be extremely harmful to underground aquifers and surrounding communities. An advantage of this system is that the home is already ducted for forced air, making it very easy and cost effective to add a cooling system, which could be cooled by a conventional air handler (very inefficient) or a heat pump (more efficient).

• Electric resistance baseboard heating. Electric resistance is the least efficient way to produce heat, and if you need to produce a lot of heat would be enormously expensive. These systems are often found in either very small homes or homes built or retrofit to the Passivhaus standard, which require very little heating to maintain a comfortable temperature year round. One advantage of this system is that it is entirely electric, and therefore can be powered by renewable electric energy such as solar, wind, or biogas.

• Geothermal (ground source) heat pump system. This is the Tesla of HVAC systems. These systems are the most efficient to operate, because they use underground pipes to heat or cool water or refrigerant to the temperature of the earth: roughly 65 degrees year round depending on your location. Cool in the summer, warm in the winter, very little energy to operate. However, the installation of these systems requires considerable digging and earth moving, which can become very costly up front. They also require adequate space on the property for installation, which we did not have in our urban location.

• Air source heat pump system, either ducted (forced air) or with mini-split units. Heat pump systems have recently become much more advanced, and are now capable of heating even when outside air temperatures are well below zero. While these systems use electricity, they can be very efficient to operate and use relatively little energy to maintain a comfortable temperature -- again, as long as your house is airtight. Mini-split systems are the most efficient, because air is heated or cooled directly where you need it and you can turn off areas of the house that you aren’t actively using. A ducted system, on the other hand, requires you to heat or cool the entire area served by the system to affect any individual room along the duct, so it can be very inefficient to operate if you have few people in a large house. These systems can take care of both heating and cooling.

Our house has three stories with the main living spaces on the first floor, bedrooms on the second floor, and the master suite on the top floor, so we ultimately decided to use a dual system of heat pumps. One heat pump in the backyard serves an air handler in the basement, which is ducted to the first floor from below and to the second floor from a single long duct running along the hallway to the bedrooms. Because cold air falls, a system in the basement is never going to be able to effectively cool a third floor, so we installed a much smaller ducted mini-split in the attic that serves the third floor suite from above. The two systems function independently, and we can turn the downstairs system down at night while we are sleeping upstairs to conserve energy.

The takeaway here is to carefully evaluate the HVAC system at the property you are considering against the way you intend to use the space and the airtightness of the envelope. You will want to minimize your energy bill to operate it, eliminate fossil fuel use if possible, and ensure year round comfort at an affordable up-front installation cost if you will be doing a renovation or upgrade.

5. Assess the electrical system.

Finally, you will want to determine if the electrical system can be used as-is or if it will need to be upgraded or replaced. There are several elements to consider here: what is the total amperage to the panel, and will it be enough? When, if ever, was the wiring in the house replaced? Is knob-and-tube wiring present in the house?

Most houses have either 100A or 200A service to the electrical panel. You can usually read this by opening up the panel door and looking at the main switch. This number tells you how much power is served to the house, and you will need to consider this if you plan to use many electric appliances such as a heat pump system, an electric or hybrid heat pump hot water heater, an on-demand hot water heater, an electric or induction range, etc. Smaller houses typically have only 100A service, and you will most likely need to upgrade to 200A or more depending on what other systems you plan to install.

If the home is more than sixty years old, you will probably need to replace the wiring if it hasn’t been done already. A recent replacement will be indicated by the presence of yellow or white plastic wire jackets, whereas older wires were encased in fabric (seriously, such a fire hazard). You will also want to look out for knob-and-tube wiring, which is evidenced by fabric covered wires or white ceramic knobs holding the wiring off of wood joists. It is often easiest to see this in the basement where the underside of the floor is exposed.

Old knob-and-tube wiring exposed in the ceiling.

If you will need to replace the wiring, consider whether you will be demoing walls down to the brick or trying to leave existing plaster or drywall in place. Demo can be very expensive, but so is hiring someone experienced in patching plaster to fill a hundred holes. If you do remove the plaster, you will have a cleaner slate to work with but you will also have to pay for more raw materials, and you will also need to add insulation back in the process.

Buying a house can be a challenging process full of hidden opportunities for expense, especially if this is your first one. Always have the home inspected by a professional inspector, and don't be afraid to spend a little extra up front to rule out costly potential problems. A hundred dollars now can save you thousands later. As long as you go in with your eyes open and know what to look for, you’ll quickly learn to recognize the difference between a diamond in the rough and a money pit that never ends, setting yourself up for a successful renovation and years of enjoyment in your new home.