Home Buyers Should Look for these 6 Signs a House is a Money Pit

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In the 1986 film The Money Pit, a couple gets a great deal on a mansion — and they don’t find out why until after they’ve moved in. One thing after another falls apart, and all they can do is throw money into the expensive repairs.

While the movie may have been fiction, there’s no shortage of homebuyers who’ve bought a money pit house. These people bought a home that needed unexpected and expensive repairs. To help you avoid the same fate, we put together a list of warning signs a house may be a money pit.

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6 Warning Signs of a Money Pit House

Even in a less competitive market, buying a home can be a time-consuming, exhausting process. You may find you’re traipsing through house after house, only to be disappointed. Because it’s one of the biggest purchases you’ll ever make, it’s important to make sure it’s a good investment.

Here are some warning signs you should know about before you tour your next home.

1. Below-Market Pricing

One factor that goes into how homes are priced is something real estate agents call “comps,” or comparable properties. They help gauge how much a property is worth based on properties similar to it. Even the seller of a for-sale-by-owner property will typically take recently sold homes into consideration.

If a house seems too good to be true, proceed with caution. Even if they are in a rush to sell,  chances are, that seller will still match typical home sale prices in that area. If a home is underpriced, grab your magnifying glass and start looking for issues.

2. Mild Neglect

Home staging is serious business, and there’s a reason for that. Homebuyers pay close attention to a home’s cosmetics. Note a home’s curb appeal, and take signs of interior or exterior neglect seriously.

“This can include things like peeling paint, cracked walls or ceilings, outdated plumbing or electrical systems and unmaintained landscaping,” said Jon Sanborn, co-founder of SD House Guys1. “These issues may seem minor at first glance, but they can quickly add up to expensive repairs and renovations down the line.”

3. Uneven Floors and Cracks

Watch for uneven flooring on the lower level. If a foundation has cracked, the flooring above may start to show it. Money pit homes may also have cracks on exterior walls. Stairstep cracks on bricks or gaps between the drywall and floors or ceilings could also be warning signs expensive repairs are in your future.

“Foundational damage is the kind of damage that you can’t exactly put off until you feel financially comfortable making the investment,” said Seamus Nally, CEO of TurboTenant2. “It has to be addressed ASAP, and it’s probably going to be quite expensive.”

4. Discoloration

Water damage is particularly costly. Warped surfaces and flaking paint will stand out, but some signs are not as obvious. According to Sebastian Frey3, a broker associate at Compass, darkening or discoloration on ceilings, floors and walls can be a red flag. Pay close attention to areas around doors, windows, skylights and vent pipes.

“Mold remediation and dry rot repairs can be very, very expensive, in particular when the house is larger,“ Frey said. “Large roofs in particular can be extremely expensive. Depending on the design and size of the roof, that alone could be over $100,000.”

5. Strange Odors

The nose knows. Take a deep breath as you walk into a house, and note what you smell. A musky odor could be a sign of mold. If the home has a basement, use the sniff test as you tour it. Even if you don’t plan to spend much time in the basement, if left unchecked, mold can spread.

As you’re touring, be aware that some smells can be removed. Yes, the aroma of cigarette smoke or pets can be a huge turnoff, but odor removal4 is affordable, especially when compared to costlier issues like mold and mildew.

6. Insect Damage

Insects are tough to keep out of a home, especially in certain areas of the country. But there’s a difference between an occasional ant infestation and a pervasive termite issue. If the previous investor hasn’t invested in pest control, insects and rodents could have done costly damage to the home, and if you buy it, you’ll be on the hook for expensive repairs.

“Not only can pests cause damage to the structure of the home, but they can also pose health hazards,” Sanborn said.

Here are some signs that a home might have pest damage:

  • Wood damage (holes or buckling)
  • Discarded wings
  • Mud tubes5
  • Insect or rodent droppings
  • Chewed wires
  • Nests
  • Grease marks on walls

Keeping Your Money Out of the Pit

No matter what you’re looking for in a house, you need to spot the difference between a good deal and trouble waiting to happen. These tips will help you spot a money pit house for sale before you sign the final paperwork.

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Find a Good Home Inspector

Before closing on a home, you’ll need to get a home inspection. The lender will probably require it if you’re borrowing money to buy the house. But even if you’re paying cash, this is one step you shouldn’t skip.

Not all home inspectors are created equal. You’ll want an inspector who represents your interests as the buyer. Your real estate agent can recommend one, but always do independent research to make sure you’re getting someone who does a thorough job.

“Make sure the home inspector is licensed and certified by a reputable organization, such as the International Association of Certified Home Inspectors (InterNACHI) or the American Society of Home Inspectors (ASHI),” Sanborn said.

Conduct Thorough Research

As a potential buyer, you have every right to ask questions. Is the home in a flood zone? Has it been taken on and off the market multiple times throughout the years? Look up the property’s sales history, available on sites like Zillow, and look for signs the previous homeowners may have had issues.

Past repairs can also be a sign a home has issues. Ask for a copy of the Seller’s Property Disclosure.

“Sellers must put into writing any concerns or issues they’ve had with their home,” said Courtney Klosterman, home insights expert at Hippo Insurance6. “Asking for a copy of this report can help you determine whether your potential investment is a good one.”

By keeping a level head during your home search, you can avoid ending up with a money pit house. Yes, getting a home at a steal is great, but if something seems too good to be true, it often is.

Stephanie Faris is a professional finance writer with more than a decade of experience. Her work has been featured on a variety of top finance sites, including Money Under 30, GoBankingRates, Retirable, Sapling and Sifter.


1.SD House Guys

2. TurboTenant

3. Sebastian Frey

4. Odor removal

5. Mud tubes

6. Hippo Insurance