Reader Profile: Digging Our Way Out of a Money Pit: A Cautionary Tale

Learning from each other is one of the most valuable tools we have as homebuyers. That’s the whole idea behind Real Savvy Real Estate. We can’t always trust supposed “experts,” so we need to learn from others who’ve been there. I hope everyone–whether you own a home, or ever plan to own one–can learn from fellow readers Jocelyn and Kevan. What happened to them could easily happen to anyone.

Jocelyn and Kevan are an engaged couple planning a wedding this fall. They found what they thought was their dream house, until it turned into their worst nightmare. Read on to learn how to avoid some major real estate pitfalls.

The newlyweds to-be...before their real estate adventure.

Homeowners: Jocelyn (29) is a teacher and Kevan (33) works in finance

Location of Property: Sunset District in San Francisco

Size: 3 bedrooms / 2 bathrooms / 1,380 sq ft

Time Owned: 2 months

How did you find your home? We’d been looking for 6 or 7 weeks starting in February. We’d seen so many awful homes. The second we walked into this house, we got so excited, running around exploring it all. We really believed this was where we wanted to be for the next 10 years. Little did we know what was in store for us!

What was the biggest surprise? The front of the house falling off. We knew when we bought it that the house needed a little work. Namely, we knew we had to fix a leaky window on the front of the house that was causing some water damage. The seller and realtor both promised us it was an easy fix, and the seller had agreed to pay $9,000 at closing towards the cost of this and other repairs.  Our realtor continually assured us that the credit should mostly cover it. Well, once the contractor opened up the wall to replace the window, it became clear there was much more damage than we’d thought. Termite damage, fire damage, the works.

The house they fell in love with.

What was supposed to be a $2,000 window replacement turned into $10,000 in repairs, then before we knew it, piece by piece, the entire front of our house got dismantled and we were looking at a $20,000 bill.

This was on top of various other “small fixes” that had turned into major problems. So far we’ve spent about $40,000 to fix things we’d thought would cost only $14,000 based on initial estimates. And the work isn’t done yet!

Did you feel adequately prepared to become homeowners? We really thought we were ready for this. Kevan had purchased a condo before, so we had some real estate experience. We used a highly recommended realtor. What we didn’t realize is that in real estate, you are truly on your own. We thought we could rely on our realtor and our home inspector to protect us. But when they failed us, we the homebuyers were left holding the bag.

Looking back, were there warning signs? The biggest mistake we made was not trusting our gut throughout the process. For example, we’d promised Jocelyn’s dad that we wouldn’t make an offer the first time we saw a house. He even made our realtor promise the same. But we immediately fell in love with this house, and we made an offer the same night, against our better judgment. We should have followed the advice, and not been swayed by our realtor’s pressure to move quickly.

The front of the house after the contractors discovered hidden termite and fire (!) damage.

Another warning sign arose later when it became clear that our realtor and the listing agent really didn’t get along–they were sending nasty emails and getting into screaming matches on the sidewalk. That was not a good sign, and it created additional problems.

The window that supposedly only needed a minor amount of work...

What advice do you have for other first time home buyers? We have a lot of advice based on our bad experience, and we hope we can help others avoid our fate!

• Know your rights and advocate for yourself. You have to remember that it’s your money and your livelihood on the line, so you absolutely should be educated and vocal throughout the process. Don’t let anyone sweep your concerns aside.

• Trust your gut. If something doesn’t feel right, it’s probably not.

• If your home inspector says there’s damage requiring “further investigation”, or if the report is inconclusive, you MUST investigate further. This may mean getting the seller’s permission to drill holes into the wall so the inspector can see what’s going on. If the seller refuses, that’s a warning sign. One option if they refuse is to ask for additional escrow funds from them, out of which you’ll pay for any structural damage you discover after closing.

• Understand what your home warranty does and does not cover, and how to approach repairs that are covered. We’d assumed the warranty would cover some of the repairs we made, but it didn’t.

• Get a realtor that specializes in your city and neighborhood. Laws and customs vary widely by area, so you need a realtor who is intimately familiar with the neighborhoods in which you’re looking.

• Home inspectors are worth a premium. Do not cut corners on your home inspection.

• Don’t make an offer on a house you’ve seen only once. When you first walk into a promising home, all you see is what you love. You won’t notice even very obvious flaws. If you think you’re going to lose the house if you don’t make the offer immediately, then it’s not the house for you. Just let it go.

Jocelyn came home one day to this lovely view...the work required was clearly far from minor.

• When a price is too good to be true, it probably is. Always question suspiciously low prices.

• Never house hunt before a big trip. We made the offer on our house just before Jocelyn left on a trip to Nicaragua. Making big decisions as a couple when one of you is out of reach with bad phone connections is very hard. We couldn’t have clear conversations, and we both didn’t want to disappoint the other. Had we been together as we went through the negotiation process, we would’ve made decisions differently.

• Don’t buy up to your budget cap, and allow lots of room for incidental costs. This is one thing we were smart about–we bought a home $60K under our limit, which has allowed us to pay for the unexpected repairs without going into huge debt.

After living through two months of construction (so far), how are you holding up? It’s definitely hard living with construction when you weren’t planning on it. We haven’t been alone in our home since we moved in, and we’ve yet to see most of it in habitable condition. But that said, we’re getting through it together. At the end of the day, we are so fortunate to have the opportunity to buy a home. Once all this is over, we’ll have a gorgeous house that we love. And we are so grateful for that.