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They lurk in the basement like a poltergeist, ready to destroy the plans of many unsuspecting home buyers who think their long search and emotional negotiation sessions are finally over. A handful of common characteristics in older houses often end up becoming deal breakers when buyers find that the cost of fixing the problem is beyond their means or that getting insurance coverage has become almost impossible.

"The perfect house does not exist," says Bob Francis, a home inspector with Shamrock Home Inspections Inc. "Every home needs something. It's just a matter of what you need and what you can afford."

One of the biggest issues today is old wiring, dating to before the 1950s, called knob and tube. This kind of wiring consists of two separate strands running through ceramic knobs and tubes. Home inspectors say it is only dangerous if someone has made unprofessional repairs, such as splicing wires outside of the junction box, or if the house has a low-capacity electrical system (100 amps is considered standard capacity today).

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Problems can occur if the wires get overloaded because they heat up, and today's household, with its personal computers and kitchen appliances, requires more electricity than homes did 50 years ago. A buyer can expect to pay between $16,000 and $20,000 to rewire a house entirely, Mr. Francis says.

Very few insurance companies will insure a home with more than 50 per cent knob and tube wiring, and some won't touch a property if it has any knob and tube. And if the insurance industry won't cover a home, the banks won't provide a mortgage.

The insurance industry is getting tougher about what it will and won't insure after suffering unexpected losses during the past several years, due mostly to a series of severe storms that have caused water, wind and sewer damage.

"Underwriting rules are tighter today than a few years ago because the loss ratio is up," says Eve Patterson, Ontario manager for the Insurance Bureau of Canada.

There are several ways home buyers can try to deal with the insurance problem. They can make their purchase offer conditional on getting insurance, or they can try using the same insurance company that the vendor has used. If knob and tube wiring is the deal breaker, there's a chance a buyer could convince an insurer to cover the house by getting an electrician to sign off on the safety of the electrical system, Ms. Patterson says.

Old oil tanks are another potential deal breaker. Underground tanks are generally not insurable. Outdoor tanks older than 15 years and indoor tanks older than 20 or 25 years will also pose problems, Ms. Patterson says.

The liability now attached to oil tanks is in fact causing some buyers to stay away altogether from homes heated with oil. "The problem for an owner of a home with an oil tank is it will not be as easy to sell their house," says Cynthia Lai, president of the Toronto Real Estate Board and a broker-manager with Re/Max Goldenway Realty Inc.

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Words than can send a chill down any buyer's spine are urea formaldehyde. A tell-tale sign of its presence is loonie-sized, patched holes in the brick exterior, or brick walls that have been covered with siding.

"As soon as people hear the word they get scared," Mr. Francis says.

Their concerns may be overplayed, however. Urea formaldehyde foam insulation hasn't been used in years, and the toxins in any existing product are much weaker now than at the time of installation.

The foam insulation was developed in the 1950s and offered a better way of insulating the nooks and crannies inside walls that are difficult to reach. Most UFFI installations occurred between 1977 and 1980, when it was banned in Canada. The greatest health risk occurred in the first few days after installation when formaldehyde gas was released as the product cured.

Today, houses with UFFI show no higher formaldehyde levels than those without it, Canada Housing and Mortgage Corp. says.

"UFFI shouldn't be a deal breaker. It poses no health concerns at all," says Darrel Smith, a senior researcher of housing technology with the federal housing agency. The only potential problem is if the insulation gets wet, it could begin to break down. In such instances, the UFFI should be removed by a specialist, he says.

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Asbestos is another frightening product for many home buyers, but it is less of an issue for insurance companies than knob-and-tube wiring. Asbestos won't do damage if it stays dry and remains encapsulated. Removing it is a very labour-intensive and expensive proposition.

Asbestos is still used in many products around the house. It may be found in clapboard, shingles, exterior siding, pipe and boiler covering, cement and putty, textured and latex paints, vinyl floor tiles and wiring. The challenge for a home owner is to know where the asbestos may be and take necessary precautions.

"Asbestos is a sleeping bear," Mr. Francis says. "It does not like to be disturbed and will create a health risk if it is upset."

A very common problem in any house is water leakage and mould in basements. By some estimates, as many as 80 per cent of all basements have previous or current water damage. But the good news is that most leaks are easily fixed by repairing an outdoor downspout or sloping pavement. If the problem does turn out to be more severe and digging is necessary to reseal the walls below grade, homeowners can expect to pay anywhere from a few thousand dollars to $30,000, Mr. Francis says.

Water eventually means mould, which can pose health risks depending on what kind of bacteria grows. More than 270 species of mould have been identified as living in Canadian homes, but only a fraction of those are known to create health problems.

"There could be mould in any age house," says Ken Ruest, a CMHC senior researcher who specializes in mould. In some cases, it may be present in a relatively new house just because someone let the bathtub overflow.

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Superficial amounts of mould can usually be removed with detergent, but deeper sources on porous surfaces will force the removal of materials and jack up costs. The expense often comes straight out of the homeowner's pocket because home insurance policies usually have an exclusion clause against mould (although if the mould results from an actual leak, it should be covered), Mr. Ruest says.

Cracks in a building's foundation may or may not spell trouble. Settlement and shrinkage cracks are normal and usually occur as a house ages. They tend to appear in the brickwork in a step pattern, following the weakest path possible. They may also show up in corners or between windows on different floors. Structural cracks, however, are serious. They are deeper than settlement cracks and tear a path in any direction, literally moving a house.

"A lot of people get scared when they see cracks, but you've really got to be able to tell which is which," Mr. Francis says.

"Because of the complexity of a house, we strongly suggest home buyers hire a home inspector," says Mr. Smith of the CMHC. In 2001, the federal housing agency looked at the issue of mandatory home inspections but decided they should remain optional across the country, at least for now. There are plans to establish a national certification standard for the profession by 2005.

About 55 per cent of homes are inspected in the resale market today, CMHC says. That is significantly less than in the United States, where 80 per cent of home buyers opt for a preliminary home inspection, according to the National Association of Realtors.

Some real estate agents consider home inspections unnecessary. They say the quality of a house is easily assessed by looking at the age of the plumbing, the type of wiring, the state of the roof, the condition of the furnace and the extent of any cracking in the foundations.

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Mr. Francis says he has drawn the wrath of many agents by alerting his clients to problems in a house that proved to be deal breakers. "There are a lot of agents out there who do not like home inspectors," Mr. Francis says. "I've had real estate agents yelling and screaming at me. But I just don't care. They're not my client."

Ms. Lai, however, says she always recommends that her clients hire a home inspector, unless they are looking at a new home. She adds that she is careful to make sure a buyer does not have false expectations about a house.

"I will always let a home buyer know that an inspection is for the big stuff, like major structural, mechanical and electrical issues, so they don't start nit-picking the whole house," she says.

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