What You Need To Know About Buying a Property With Foundation Issues
When trying to buy a new property, several things go into making the final decision on which home to buy. Primary among the considerations is the location and cost of the house. The cost of the property doesn’t refer to its purchase price alone, but the other expenses involved in bringing that home to the shape you want it to be.
Most times, while searching for your ideal property, it is easy to determine if a home is the right one or not when you have all your parameters spelled out. But, there are times when you will find a home and it is not easy to make decisions. The house may be in the appropriate location or have the right price, but something about it makes the decision difficult.
That is the case when you encounter a property with foundation issues. Although the home is located in the right place and priced competitively, you know the presence of foundation damage may present unforeseen problems in the future. If the home you like has foundation issues, what are the factors you should look at to make your decision?
Are there good reasons to buy a home with foundation issues?
Firstly, why would you or anyone think of buying a home if it has foundation problems? From an investment point of view, there are valid reasons to buy a home with foundation issues. A lot of property investors go out of their way to look for this kind of home. Why do they do it?
Homes with foundation problems are cheaper. A property with foundation damage can sell 20%-25% below the price of similar but structurally sound homes.
Furthermore, because most buyers will run for cover once you say “foundation damage,” buyers of foundation-damaged homes will have more room to negotiate.
Also, you can fix most foundation problems, and many times the cost of repair is less than the difference between the price of the home and that of structurally sound homes. As a result, a person who buys a home with foundation damage ends up getting it at a much lower price, and they can turn around and sell the house for profit.
Despite these, buying a home with foundation problems requires buyers to have a lot of insight. You must know what you are getting into before you pay for that home. Below are the steps to follow to protect yourself and ensure you don’t buy a foundation-damaged home that will pose significant problems for you in the future.
What to know when buying a home with foundation issues
1. Know how bad the problem is
To know the cause and extent of the problem, you need licensed structural engineers – these are the only people with the expertise to evaluate the situation. The structural engineer will write a report detailing the cause of the foundation issues, how far it has gone, how you can fix it, and the estimated cost for repairs. Lenders and insurers will only accept a report created by a licensed structural engineer.
2. Know how much it will cost to repair
Fixing a damaged foundation costs $3,500-$40,000. That depends on the origin of the problem, duration, soil type, and the specific solutions to apply. To know the estimated cost of repairs, ask for estimates from foundation repair companies (minimum of three). A comprehensive estimate that offers extensive warranties is your best option; do not choose the cheapest or quickest solution.
3. Know the implications on your mortgage
Getting a mortgage for a home with foundation damage can be problematic. Typically, homes with foundation damage do not qualify for government-backed financing, and lenders will often require finishing the foundation repairs before the loan is closed. It limits your sources of funding for financing the home. The best ways to finance homes with foundation damage are hard money or a rehabilitation loan (FHA Rehab loans, Fannie Mae HomeStyle Renovation Mortgage, or Freddie Mac CHOICERenovation Mortgage).
4. Know the impact on the salability and value of the home
Even when you repair foundation damage, it can impact the value of a home. That is because the repair will always appear in the records for the property. That is not a big problem if you fix the damage permanently and if you are going to live in the home. To be sure the foundation problem will not reoccur, require firm warranties from the foundation repair company. Before the job is signed-off on, get the structural engineer who inspected the home initially to inspect it again and give their written professional opinion.
Finally, never let the seller fix the foundation. That is a recipe for disaster. If they did so before your arrival, ask to see the warranties. Ensure they are comprehensive and transferrable before you commit to anything. Lastly, always give yourself a way out by including contingencies in all agreements.
Contact Douglass Briggs at: firstname.lastname@example.org – (415) 251-4209 for more information