Living in a Money Pit

Posted September 24th, 2010
by Staff (no comments)

When you buy a house, it’s not like buying a toaster. If you buy a toaster and it doesn’t work right, or doesn’t do everything you want it to do, you simply take it back. In a worst case scenario where the store won’t take it back, you simply buy another toaster. If you buy a car and it gets into a wreck and needs repairs, you have your car insurance to pay for it. If your home turns out to be a lemon and need a bunch of repairs, your homeowners insurance isn’t going to cover it. In fact, if someone is injured in your home because of those things that need repair, it’s entirely possible that your homeowners insurance won’t cover it.

Here is a way to tell if you’re living in a money pit: you’re spending more than 2 percent of your home’s value each year, on average, on home repairs.

Now, you can expect that, occasionally, this will happen. Everyone needs to replace a roof or a furnace, from time to time. When it happens on a regular basis, however, then you know you’ve got a bigger problem.

ServiceMagic, which is a company that is involved in a variety of home services including repairs, has offered a list of categories when it comes to putting money into your home repairs:

  • The Money Pit. As mentioned if you spend more than 2 percent annually on home repairs you have a money pit.
  • The Sinkhole. A sinkhole is a little bit better than a pit, according to ServiceMagic. If you spend between 1.6 percent and 2 percent of your home’s value each year on repairs, you have a sinkhold.
  • The Drain. A more mild but still significant category is the drain. If you spend between 1 percent and 1.5 percent a year on repairs, you have a drain.

If your home falls into one of these categories, it may be time to crawl out of the pit (or sinkhole or drain) and find a home that doesn’t cause as much of a fin

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