Pay Dirt is Slate’s money advice column. Have a question? Send it to Athena and Elizabeth here. (It’s anonymous!)
Dear Pay Dirt,
I have made a terrible mistake and I don’t know what to do about it. I just bought a house that’s now falling down around me. I got a conventional loan with 20 percent down. The seller did not report any major structural issues during closing, but I have discovered that the house is splitting in two. It started out as a single-wide mobile home but it has so many additions that it looks like a brick-and-mortar home. There’s an inch-wide crack in the floor, and the roof is buckling in the same spot. The subflooring needs to be replaced. The doors don’t latch, and the floors aren’t level. The heat pump just died, too.
My real estate agent did not recommend a home inspection. He was a stranger to me, but told me that he was my friend, and when I wanted to back out of the sale, he strongly urged me “as a friend” to go through with it.
This house needs at least $30,000 in repairs just to keep it from falling down. I paid $180,000 for it. It seems to me like the seller should have reported the obvious defects and the realtor should have pushed for a home inspection at the very least. However, I am an adult and I should have been more observant and less excited when I toured the house.
I realize that you can’t give me legal advice, but I just don’t know where to go from here. I have contacted five attorneys but nobody wants the case, so maybe I don’t have one. Do I try to sell it and cut my losses, or fix it up? Unlike the previous seller, if I did sell, I would be required to report the structural defects, so I suppose I’m going to have to fix it and live with it. Do I have any other options?
—A Big, Huge Whoops
Dear Huge Whoops,
Wow, this is a biggie. I know it doesn’t make you feel better but a lot of other people are forgoing the home inspection in order to beat out other bidders. It’s not wise, sure, but you aren’t alone.
For this question, I consulted with Tom Brickman, a real estate expert from the Frugal Gay. A few days after buying his first property, he said, water was pooling in his basement and the paint started to peel. “It was pretty clear that the seller put some lipstick on a pig and passed it off to an unsuspecting buyer. I would have had to have the burden of proof to try to go after the seller and I just didn’t have that. Your situation sounds similar, with the burden of proof falling on you since you had no inspection.” Brickman explained that to bring a case, you would have to be able to prove that the prior owner knew what they were doing when they sold to you, and this is likely why all the attorneys you’ve consulted have passed.
If you offload your home, you’ll be back to square one, and bitter. Instead, start doing the repairs and make it into a home you love. Brickman advises getting at least three estimates on all work before going ahead. “I’d explore possibly getting an equity line of credit or similar since you have 20 percent invested into the home already,” he said, adding, “I know some HVAC companies will do loans.”
It’s not the most ideal answer—I know taking on debt never sounds great—but hopefully, you can look at the bright side. You have learned a very hard lesson now before you venture into possibly acquiring more costly real estate later on in life.
Dear Pay Dirt,
I live in a midsize American city where pretty much everyone has a car. Before moving here last year, I’d lived for 10 years in a much larger city that was well served by public transit, so I never owned a car. I live downtown in my new city and even picked the location based on its proximity to a grocery store so I could continue to live car-free. I bike, have taken the limited bus service a few times, and have gotten rides from friends and family.
But I’m beginning to long for the freedom a car would allow. My understanding is that now is not a great time to buy a car, due to the chip shortage and supply chain limitations, so I’m happy to wait a little longer, but how will I know when it is the right time? And how do I decide how much car I can afford?
I have what feels to me like above-average savings and on paper I can afford a decent new or used vehicle, but I’m the kind of person who frets over purchasing a piece of technology that costs a couple hundred dollars. How do I get over the hurdle of dropping thousands of dollars on a thing I don’t necessarily need—and that will likely require more and more money in the form of insurance, gas, repairs, etc.?
Maybe I am already talking myself out of buying a car altogether! It just seems like such a common American purchase for so many and yet I’m paralyzed by fear at the gravity of such a transaction. How do I wrap my head around this?
—This Car Thing Seems Inevitable—or Is It?
Dear Car Thing,
Just like with housing, buying a car is insane right now. New cars are snapped up as soon as they come off the assembly line, and while the used-car market has improved for consumers recently, used cars are still expensive, when compared with their pre-pandemic prices. Recently, my niece sold her car back to the dealership and made $7,000. As I’ve moved in with my BF and now work fully at home, I can’t say I haven’t been tempted to do the same! But the point is, we don’t know when things will (if ever) be back to normal.
With that being said, if you’re going to buy a car, feel free to do so now—you might as well, given our lack of clarity on the future. How much car you can afford is up to you, but the general rule of thumb experts recommend is that no more than 10 to 15 percent of your take-home pay, per month, should go to transportation costs. You’ll also want to remember that with a car comes additional expenses, more than just the payment itself, such as gas and car insurance. If you can afford it, and desire freedom badly, go for it.
If you’re still not sure, you can pause your plans for purchase and look into Turo, an app that is like Airbnb for cars. You can rent a car from a private host when it’s needed and then return it when you’re done. Try renting a car for a week or two and seeing how often you use it. You may have more clarity on whether or not a purchase is necessary.
Dear Pay Dirt,
I seem to have created a serious ethical dilemma for myself and I’m struggling to figure out the best path here. I rented my prior home to a friend who had been struggling with near homelessness. He and his partner both have compromised immune systems and they were living in a converted garage with animal droppings in the attic (which drained into their living space when it rained). They’re both great, even brave people, and they both have very limited income.
I got the house HUD-certified and allowed them to live there at less than what it cost to be the landlord. It wasn’t a large sum of money all at once, but they’ve lived there for more than 13 years now, and I need to sell the place. I need the money I have tied up in the equity of that property, and I need to stop paying out. It seems like a good time—one of them just inherited a substantial sum, and so they want to buy the place and stay there. I love the idea, but they still don’t have enough to give me more than about 80 percent of the appraised value.
So, now I don’t know what to do. I don’t feel right donating that much of my capital even for a good cause, I’ve already been more than generous—but I really like the guys and the thought of forcing them to move into someplace terrible is keeping me up nights. Any objective light you could shed on this situation would be most welcome.
—I Want to Keep Being Kind
Dear Being Kind,
I can only imagine how you feel right now, and this predicament would probably keep me up at night too.
I know you feel badly, but you have already stated that you want to be done with being a landlord and have done this for 13 years. I know it feels like you are ripping the rug out from underneath them, but at some point, you have to do what’s best for you, even if that means selling it to another bidder.
You say they could buy your house at 80 percent of the asking price, using this inheritance, so it sounds like they could potentially buy another home, just not yours. Have they looked into a condo or a town house? Those are usually cheaper than purchasing a home, and have less upkeep.
If you do sell the place, give them a heads-up ASAP, and maybe even offer to help them with the process of looking for a new place and applying for a mortgage, if you feel like you have the capacity to do that. You are right—housing is astronomically high in cost right now, and scarce, so they may need additional time to look. Ask them what they think is fair, and try to find a timeline that can accommodate both of you. Good luck!
Dear Pay Dirt,
Earlier this year, I was fired from a very toxic, low-paying nonprofit job. It ended up being a blessing as I recently found out that I gained skills that are highly sought after in consulting. I cannot find a job, however, because these skills are not regularly required.
I am making more money than I thought I would at this point in my life. I do, however, miss doing my previous work. I cannot see myself doing my current consulting for more than a year or two. It is challenging but not fulfilling.
I have spoken to a friend who works at my dream nonprofit, who says that a position will likely be opening up in about a year. I have always planned to work in a nonprofit and would be happy to go back in a year.
My issue, for now, is my student loans. I assumed I would simply get loan forgiveness by working at a nonprofit. Now, with the money I’m making from consulting, I could possibly pay off all or most of my loans by the end of the year. I, however, would also like to buy a house. I am trying to figure out which one I should prioritize. If I’ve estimated my future income correctly, I could end up paying about half of my loans back through a loan forgiveness program. Then, there’s always the possibility of student loan cancellation. I know that neither of these are a guarantee, as the programs can change with the administration, but I had always planned for these to be how I paid off my loans. I’m also worried that if I don’t get on the property ladder now, prices will continue to rise to a level that will price me out of the market, especially when I expect to go back to a modest salary. What do you advise?
—Going Back and Forth
Dear Back and Forth,
If your student loans will be manageable on top of all the new expenses you would take on as a homeowner, I’d buy a home if that’s truly what you want to do.
I understand owning a home is a dream for many, and you are absolutely right. You can’t predict the housing market, the course of the government’s approach to the student loan crisis, or even how your life will go in general. Take advantage of your high-paying job now and use it to invest in your dream of homeownership. You have the option to pay off your student loans now or at a later time. Your dream home at an affordable rate? Not so much.
More Advice From Slate
Recently my 16-year-old nephew came to stay with us for a few days. He lives four hours away in a small country town, and this is the first time he has ever visited us by himself. It emerged in the course of our conversations that not only has his mother not provided any real direction for him on how he can get to university, but she has clearly lied to him about her own schooling: She has told him she excelled at school; my partner, her brother, knows she barely got through high school at all. So far, we’ve not really said anything to contradict (or for that matter support) what he has been told. We have just talked to him about our own efforts and education (we both have college degrees). I’ve also taken the liberty of doing some research on his options for college—he is very intelligent!—and given him some material to read. Hopefully he can find a path for himself. Do we owe this kid anything beyond helping him figure out if university is the right next step for him?