We are learning that this process is ever-changing. Yesterday afternoon our real estate agent called to break the news that on top of the five major problems we already knew about there are no permits for the majority of the electrical work that was done in the house in 1992. Essentially, this means that there is no proof that the electrical work was done to code and if we were to have an electrical fire this might be a problem for insurance purposes. This is a major problem because we need to seriously consider the possibility that the electrical wiring is a fire hazard and that in order to be completely sure that it is safe we would need to have the entire house rewired. As you can imagine, this would not be an inexpensive undertaking.
Then, just as we were considering this several-thousand-dollar conundrum, we received a message from our agent that she had talked to her own contractor and that he said he could inspect all the electrical and have it permitted if it is done to code. This would give us a lot of peace of mind that our house is safe and, as long as the wiring is done correctly, be a lot less expensive than rewiring the whole house. Phew!
So here is our status currently: The sellers have extended our inspection period from 7 days (ending Tuesday) to 10 days (ending Friday) to give themselves and us longer to fully evaluate the repairs that need to be done on the house. The selling agent is getting a second opinion on the sewer pipe and working with the neighbors to get their line disconnected from ours so that we will be able to move forward with that repair. Our agent's contractor is evaluating the exhaust chimney to give us a recommendation on the urgency of the problem and a bid on the cost to remove it. In the meantime, the selling agent has offered to loan us an extra chimney cap to keep water out and prevent future damage. A foundation specialist is coming on Monday to evaluate the section of the foundation wall that is crumbling and to give an estimate on what it would cost to repair it. And most importantly for us, the sellers are considering paying our closing costs which would generate some extremely helpful money so that we can begin making some of these major repairs.
So we have until Tuesday to decide whether to take the house or back out. Basically, the decision that we have to make is how much money we are willing to put into this house. We started out with a purchase price that was already out of our original budget and now we are adding several expenses on top of that. The questions are, of course, at what point is the house no longer worth the money that we are putting into it? and, at what point can we no longer reasonably afford the house?
We are of the opinion that you need money to make money. If we walk away, guaranteed some investor will come forward and make a small fortune off the rehab of this house and we will miss out not only on that opportunity but on the many years we could have lived in it in the meantime. For this reason, our inclination is to stretch our budget as far as we can for as long as the house can still be considered a good investment. We'll just have to make it work.
The other thing we need to consider is our original goal in buying a house. It is not a necessity for us to own a house at this point in our lives; we could just as easily rent a house or move into a bigger apartment. We set out with the goal of finding a house that we could fix up, make beautiful, live in for a few years and sell. If we are able to make a profit, that is a bonus, but in the meantime we would have a lot of fun and gain a lot of valuable experience in real estate, home ownership, design and general handy-ness. Our primary goals were to stay in the areas of Portland that we love and to make a smart investment that would have minimum risk of a major loss when we sell. We figure if we shoot for a profit, hopefully the worst we can do is break even. This house is a great opportunity to reach our goals. It is in a great area and it is exactly the kind of house we were envisioning we would find. The house meets our needs so perfectly that we are concerned that we might not have another opportunity like it.
Even if we were to find another house like this, there is a very good chance that we will once again be outbid by investors. It seems like to much to expect that another seller would take a loss to sell to us. And even if we do have another opportunity to buy a house like this, chances are it will have all the same problems, or more! If this is the best shot we have at attaining our goal, to walk away from this house would be to walk away from that goal. To continue our house search we would have to change our criteria drastically. We would either have to start shopping further out of the city where you can get bigger or newer houses for less money, or we would have to start looking at smaller houses that we could get with money left over for repairs. These options are both undesirable to us and hurt our resale market thereby making the investment a little less of a smart one.
We've said from the beginning that we were shopping for a house not simply to buy a house but to see if it was possible for us to make what we feel like is a smart investment. We said that if it turns out that this is not possible, we would simply not buy a house. If we were to walk away from our house we would have to seriously consider whether we can continue to move forward and stick to our original plan or whether we should just walk away altogether.
Decisions, decisions.
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