The $231.75 that got us out of a $36,000 house
We agreed to buy a house in Youngstown for $36,000. Then we paid $231.75 to find out we shouldn't.
Here's how it went.
We make offers on houses before we ever walk through them. That sounds reckless until you look at the order things happen in. The offer goes in, the seller says yes, and then an inspector goes through the house before closing. If the inspection says no, we're out.
This one was built in 1926. The seller accepted $36,000, which was right at the most our numbers let us pay.
The inspection came back with:
I read the report and said it wasn't a zero-rehab house. We buy houses a family can move into as they are. We don't renovate. Our rough guess on the repairs was about $12,000 to $20,000, maybe as much as $30,000. That was a guess, not a quote.
So we asked for $30,000 because of the roof. That didn't happen, so we told the agent we understood and would step aside, and asked for the release. It came over a few hours later.
What it cost us to walk away: one $231.75 inspection.
Through early October we'd paid for four inspections with our inspector this year, about $1,071 all together. Two of those were houses we went on to buy. This one we walked away from. I count all four as the inspection doing its job.
Why I'm writing about this:
With an index fund there's nothing to inspect. You're buying the whole market. With one house, what you find out before you pay decides most of the deal. Most of the risk you can control gets decided before the money goes in, in the boring stuff: what's actually wrong with the house, what it's worth, and whether the title is clean.
When I lent money from my own Roth IRA, my checks before funding were the house's value, the title and the insurance, all through the title company, plus the operator's reputation with local landlords. Once the money is in, you've mostly already made your decision.
The deals you walk away from are part of the plan, not a failure of it. A $231.75 no is about the cheapest answer you'll ever get in real estate.
Here's how it went.
We make offers on houses before we ever walk through them. That sounds reckless until you look at the order things happen in. The offer goes in, the seller says yes, and then an inspector goes through the house before closing. If the inspection says no, we're out.
This one was built in 1926. The seller accepted $36,000, which was right at the most our numbers let us pay.
The inspection came back with:
- A roof 25 to 30 years old, missing shingles, with a tarp over the back section
- A furnace 70 to 80 years old, burning yellow flames (the kind that can mean carbon monoxide)
- A bowed foundation wall
- What looked like mold on the subfloor
I read the report and said it wasn't a zero-rehab house. We buy houses a family can move into as they are. We don't renovate. Our rough guess on the repairs was about $12,000 to $20,000, maybe as much as $30,000. That was a guess, not a quote.
So we asked for $30,000 because of the roof. That didn't happen, so we told the agent we understood and would step aside, and asked for the release. It came over a few hours later.
What it cost us to walk away: one $231.75 inspection.
Through early October we'd paid for four inspections with our inspector this year, about $1,071 all together. Two of those were houses we went on to buy. This one we walked away from. I count all four as the inspection doing its job.
Why I'm writing about this:
With an index fund there's nothing to inspect. You're buying the whole market. With one house, what you find out before you pay decides most of the deal. Most of the risk you can control gets decided before the money goes in, in the boring stuff: what's actually wrong with the house, what it's worth, and whether the title is clean.
When I lent money from my own Roth IRA, my checks before funding were the house's value, the title and the insurance, all through the title company, plus the operator's reputation with local landlords. Once the money is in, you've mostly already made your decision.
The deals you walk away from are part of the plan, not a failure of it. A $231.75 no is about the cheapest answer you'll ever get in real estate.