I often hear people tell me their concerns about buying older houses. And, let me be very blunt, there are many, many risks in buying old houses. There is also a lot of money to be made in old houses. But there’s a fine line between risk and reward.
Before you pull the trigger on an old house, be aware of the risks first. In a minute, I’ll review the potential mitigation of those risks as well.
Lead Based Paint
If you purchase a home constructed prior to 1978, you will receive a Lead Base Paint disclosure. Homes built before 1978 have the potential for the presence of lead base paint. It is not a guarantee that it is present, but there is a probability. Lead Base Paint is a hazard causing potential defects in humans if consumed. One of the characteristics of lead base paint is the “flaking” appearance it has, and it can be located on the interior or exterior of the home. Just because an owner of a property built before 1978 provides you with an LBD disclosure, it is not always insightful. If they have never been disclosed about the presence of mold, then all they are disclosing to the buyers is that they are unaware if it’s present or not, but that there is a potential for its presence. It’s typically up to the buyer to do lead base paint testing during their inspection period.
The older the home, the potential grows for outdated wiring. Outdated wiring can certainly be a safety hazard. Again, it’s typically up to the buyer, during their inspection period, to discover the outdated wiring. Knowing the exact condition and updates to the electrical situation is essential. And for a whole host of reasons, this is one of the jobs you don’t DIY. You hire a licensed and insured electrician. But again, as the buyer, you are typically the one that discovers this (or at least verifies it), and it’s your decision if you want to assume that liability and expense or not.
Decayed or Aging Plumbing
It’s almost a “take it to the bank” guarantee that if you’re looking at an older house, you’re looking at plumbing that is functioning on borrowed time. Over the years, plumbing decays, corrodes, and breaks/bursts. Nothing about any of those scenarios is cheap or fun. At some point, older homes require a complete re-pipe which is typically in the thousands of dollars range. While the outdated wiring is a problem for obvious safety issues, the decayed plumbing is typically more of an inconvenience/expense issue. As with LBP and outdated wiring, decayed plumbing is something the buyer typically discovers during the inspection. If the homeowner, however, had a leaking pipe/burst pipe/etc while they owned the home, they are required to disclose that and how they repaired it.
Ancient HVAC Systems & Appliances
If you’re looking at very older homes, it’s probable that the HVAC and appliances were updated at some point. However, it’s very common for me to walk into a home built in the 1970s and the original appliances and HVAC systems are still present. Like the plumbing, older units are living on borrowed time. Depending on the size of the house, HVAC units can get very costly. While appliances aren’t as dollar heavy on the replacement, you could easily shell out a couple thousand replacing appliances. Again, the home inspection you have done by a licensed home inspector will reveal if they are working or not, date of manufacture, and a probable diagnosis of future life span.
While these are not the only potential risks of older homes (example asbestos, radon, etc), these are very common. It’s important you have a licensed home inspector inspect the property prior to purchase to reveal all of the potential risks associated with that particular property.
But just because there are risks, doesn’t mean you shouldn’t buy an older property. Every single one of my flips have been older properties. Knowing how to mitigate or prepare for the risks will help you in the long run. It’s important to note, putting your head in the sand and buying the house because you love it and not preparing for the risks will leave you in a very financially exposed state.
Here are a few tips on how to mitigate the risks associated with older homes:
Lead Base Paint Testing, Encasement, or Abatement
The first step is to obviously identify if there is lead base paint. A standard home inspector will not test for lead base paint. Each state has several certified lead base paint “testers.” It’s an additional expense (typically the buyer’s expense) to have a professional come test for LBP. Once it’s confirmed that LBP is present, there are two options: encasement or abatement. Encasement is covering it up. For example, if the original wood siding tests positive for LBP, vinyl siding can cover the existing wood siding. It’s important, however, that the EPA and state guidelines are followed when doing encasement. They may have additional steps required before attaching the new siding. Abatement is permanently removing the hazard, and it is the most expensive option. Abatement can not be done by yourself, and EPA disposal guidelines must be followed.
If you are buying a house and during the inspection period you discover there is LBP, that is knowledge you should provide to the home owner. The home owner has now been disclosed and is required to now disclose that information to any potential buyer. In a negotiating strategy, you can use this information to your advantage as the buyer. I’ve never heard of a seller willing to encase or abate LBP, but I have heard of using the knowledge to re-negotiate a lower purchase price. By presenting the facts and potential costs, you can ask the seller to lower the purchase price or provide an allowance to deal with the issue.
While it is possible to do a partial rewire, wherever there is original wiring, there is risk. Again, during the home inspection process you should receive a general diagnosis on the state of the electrical in the home. This is something that can be presented to the seller as a repair by a licensed electrician. The seller may not agree to a full re-wire, but they may agree to partial updates (adding GFCI, etc) or providing an allowance or renegotiated purchase price. You have the option as the buyer during the inspection period to have your licensed electrician come give a bid on what it would cost to do a full rewire. Using that estimated dollar figure, you can present that information to the seller requesting that amount in an allowance or lower purchase price. Sometimes the re-negotiations are more of a meet in the middle kind of scenario, so the seller may not give you all of the money. The seller is not even obligated to give you any money or do the repairs, and in that scenario, you as the buyer, could have the option to walk away from the deal.
If you follow me on Instagram, you know I’ve been singing the praises of my home warranty company at Flip 5. Often times people get builder’s warranty and home warranty confused. A builder’s warranty is typically a one year warranty from the builder of a new construction home. A home warranty, however, can be a warranty on a home of any age. Depending on the home warranty, it can provide coverage of decaying plumbing and aged appliances & HVAC units. There are various home warranty companies and tiers of coverage within each home warranty company. A home warranty can cover full or partial replacement or repair to any of the covered units. A home warranty acts much like an insurance plan on the older units.
So who pays for the home warranty? As a buyer, you can ask the seller to pay for the home warranty, or you have the option to purchase a home warranty at any time for a property. Home warranties range in cost but are usually in the ballpark of $600/year. If you do ask for the seller to pay for the home warranty, do you your homework on which company provides the best coverage and which tier is best. With Flip 5, I negotiated the seller to pay for the supreme plan with 2-10 Home Warranty. This was very helpful this week when a pipe fitting broke and my crawl space flooded. Like insurance, I was required to pay a service fee (like a copay) of $100. Everything else (just over $800) was covered by the home warranty. It’s important to note, however, that home warranties cover what’s broken–not the damage. Any damages are covered by a home insurance plan. A home warranty is helpful if you know some of the appliances or pipes are living on borrowed time, and you don’t have the upfront costs to pay for a full repipe or appliances.
Old houses do have their issues. But they also have charm! Established neighborhoods can provide homes with character, shade trees, and, sometimes, a more affordable price. By having a Realtor that will negotiate on your behalf to mitigate some of the expenses with the seller, knowing your options, and definitely knowing the condition of the property can ease some of the risks that come with older homes.
My non-negotiable advice with older homes though is that you MUST have a professional home inspection done. Never purchase an older home with your eyes closed. Knowledge is power, and knowing the extent of the risks is essential!