Thursday, February 5, 2009

Ask The Curmudgeonly Canadian - Straight Talk About Hard Times

Halving It All is pleased to announce our latest feature - Ask The Curmudgeonly Canadian! Send in your questions about finances, the recession, buying and selling houses, renovations, computer programming, affairs of the heart, and whatever else you can think of. The Curmudgeonly Canadian (aka my husband) will answer with brutal honesty.


Our first question comes from "Happy".

"Dear Curmudgeonly Canadian,

What do you look for in a bargain house you may be looking at? Trouble signs, etc."

CC answers:

Dear Happy:

To decide whether or not a house is a bargain:

1. I add the cost of my planned renovations to the purchase price of the house(including something for my time and risk).

2. I add in any buying and selling costs. (This means taking into account realtor fees if you are going that route and whatever normal fees buyers and sellers pay on a house of that value in your neck of the woods. In Canada, your notary public can handle the sale so check with them, in the US you can check with your local escrow agent to find out what normal fees would be. If you need a mortgage then also talk to the bank and find out about any costs you might incur to get a mortgage, to pay off a mortgage and whether you would have enough money into the place that you could avoid PMI and other loan related costs.)

3. I compare it to the price of similar house that has recently sold in the neighborhood (a house of similar size and number of rooms). If the number I've reached for my purchase and renovation is significantly less, then I've found a bargain.

OK, assuming that you have identified a bona fide bargai, here's my take. (Further caveats: I'm not a pro; I just know enough to be dangerous. I also don't have a vested interest so that may make my advice more valuable than that of a professional who wants your money. Think of me as crazy old uncle Lenny who might just know a thing or two.) Here are the things I look at:

1. I look at the foundation - if it's not on a solid basement then you want to get down there with a flashlight and start looking around for water and termite damage.

2. Is the electrical system sound? If you take covers off of things will you find blackened spots where things have gotten too hot?

3. What kind of shape is the roof in? try to get up in the rafters and see if there is adequate air flow so that things haven't been sweating and subsequently rotting.

4. Look at the plumbing and step around all of the potentially wet areas of the house (sinks, toilets, tubs) and see if anything is soft which might equate to water damage.

5. Are the floor joists for all levels still sound? Are they not too long for the span they are carrying and of sufficient size not to cause sagging? Look for cracks in drywall which will suggest the foundation might be up to something (shifting).

My ideal bargain? A house that's priced way under market, with bad carpets and beat walls - cosmetic problems that frighten off the newbies but are the easiest things to rip out and make new again for a small amount of time and money.

Good luck!

The Curmudgeonly Canadian


Do you have a question for the Curmudgeonly Canadian? Email it to: lenandjennifer!


Ann said...

Enjoyed your article. We are thinking about getting back into the housing market and I would like to buy a fixer upper, so that even if prices continue to move lower, we won't be upside down in our loan. -Ann (Kanga)

Lorna said...

I totally agree. We have always been very lucky with our homes. They have generally been very cheap because of: tobacco stained carpets, coloured bathroom suites, gloomy dark wallpaper and unfashionable decor. These are all things that are so easy to correct. We are always amazed at the number of friends who come round and covet our homes, whilst telling us that they, in fact, considered buying the home but decided against it before we bought ours.
Location and thinking of your purchase as a home and not as investment is essential. That way you can't lose - as long as you buy within your income means.
Great post, I'll have to come up with another question for you :-)