Summer is approaching and people across the US are heading out to buy homes. You didn’t know that? April – July is the heaviest season in the US when it comes to home buying. And since pools tend to look the most tempting in those warm spring and summer months, we wanted to give a bit of a PSA for people out there considering buying a home with a pool or having one installed.
This is going to be a little three-part series on The Actual Cost of Owning A Pool and it’s going to go something like this:
- Part 1 – Building A New Pool Cost The Entire House
- Part 2 – We Only Have A Pool Because It Was Free
- Part 3 – The Hard Numbers of Pool Ownership
Building A New Pool Cost The Entire House
When we started looking seriously for homes to buy in early 2009, we certainly weren’t looking for a home with a pool. We didn’t really want one either because we knew it would be another expense to worry about. But the pool is probably the biggest reason we have our home.
Let me say that again. We weren’t looking for a pool, we didn’t really want a pool, but the existence of the pool in the home we ended up buying is the biggest reason we have our house today.
Don’t worry, nobody was calling us Spending Our Pennies back then either. We didn’t temporarily lose our minds, go gaga at the sight of a pool and form completely irrational emotional attachments to a pool home before we bought it.
Rather, I think the pool is probably the biggest reason we have our house today, because it was probably the main reason that the previous owners ended up in foreclosure. That’s right. Installing the pool was probably the first step that led the previous owners down a path that (for them) ended in foreclosure and (for us) began our married life very affordably in this awesome little house in a lovely neighborhood that’s within jogging distance from the beach.
We know our good fortune with this house came at the expense of the previous owners, which is why we want to share some of their story so it doesn’t happen to you.
Buying A Pool Cost The Whole House
This story is completely true. The numbers all come from our somewhat obsessive digging around in public records and the personal details come from some of the neighbors on our block.
In 1997, the previous owners (Mr & Mrs PO) purchased our little house. Mr and Mrs PO had recently retired and were in their mid-sixties. When they picked out their nice little home, they saw the neighbor’s homes on either side. They both had pools. In fact, every backyard they could look into from around the lake had a pool, too. So, they put in a pool.
The mortgage records from the home purchase show they did a little fancy footwork. The house sold for about $110K, which they split up into two mortgages, one for about $90K, the other the remaining $20K. So this was a $0 down home purchase. The pool was built just a few months later, so that seems to be where the money that would have typically been used for the down payment went.
Fast forward a few years to 2003, and the house needs a new roof. Mr and Mrs PO found that the house had increased in market value (yay!) and they took a refinance with a cash-out portion around the same time a new roof was installed on the house. This time the refinance was for another $20K higher than the original balance. So the refinance was for $130K, when the balance on their prior loans combined (assuming they got the best rate possible in 1997 – about 7.5%) would have been about $102K. So this refinance probably pulled t least $28K out in cash.
The new roof cost maybe $7K? So what about the other $21K? We know it probably didn’t go into the house as by then Mr. and Mrs. PO were DIY-ing some new tile floors and not doing a very good job of it.
Fast forward another couple of years to 2006. Mr and Mrs PO have been in the house almost ten years, and Mrs PO got sick. Sick enough that she needed to go into some sort of assisted living facility. Mr PO didn’t move in with her, instead choosing to stay in the house. So the need for assisted living sparked another draw on the home equity (that was peaking!) in the form of a home equity line of credit worth another $20K.
In 1997, Mr and Mrs PO wanted a house that sold for $110K. They probably had enough cash to have a solid 20% or more down payment, but instead financed 100% of the house and used cash (or other financing) to put in a pool that probably cost about $30K to install. Then after 10 years of diligently paying their mortgage bills (which kept rising due to the cash out refi and HELOC), Mr and Mrs PO had a mortgage of about $130K and a HELOC on top of that for another $20K for a total of $150K in home-debt. But instead of being in their mid-sixties, they were in their mid-70’s in ill health and facing down another 27 years of mortgage payments.
The details of the story get a little vague around this point. Public records show there was a renter and legal action was filed against the renter, though it was dismissed. There might be more… but it was definitely drama according to the neighbors and we’ve never pressed for too many details. It feels a little weird. But by 2008 the bank was completing the foreclosure proceedings and by 2009 I was walking through with our realtor.
Is It Fair To Blame the Pool?
But Mrs PO got sick! It isn’t fair to blame it on the pool purchase when they couldn’t know that Mrs PO would get sick! Right?
Welllll… I vote no, it is fair to blame the pool – at least in part. After all, blaming inanimate objects is fun!
Kidding aside, using a down payment for a pool instead of a building immediate equity was a bad idea. They bought an “asset” (Part 3 will show it’s actually kindof a liability) that immediately started depreciating. And the pool was a huge element of lifestyle inflation when it came to the house. Without the pool their monthly costs would have been lower (we’ll talk more about how much lower in Part 3), so they probably could have set money aside and completed the roof without needing another refinance. There’s also the element of lifestyle inflation that the pool established and the cash-out made possible.
When Mrs PO got sick, they were probably right near the precipice of financial stability, which I’ll bet isn’t where they planned on being in their mid-70’s. Without the pool and the lifestyle fluff that followed it, they would have owed about $78K on their house in 2006 rather than the almost $130K they owed. Pulling $20K out to help with medical expenses is very different when you owe $78K instead of $130K.
So yeah, even though pools don’t make decisions, people do… I still think that the pool (or rather the decision to install the pool and how to pay for it) was a big part of the road that led them to foreclosure.
Stay tuned for the rest of the series:
What do you think? Am I right to attribute the foreclosure on the previous owners largely to the pool?