It is obviously difficult to sell a home that has foundation issues. It gets even more complicated trying to figure out how to resolve the issues. However, when done correctly, a property that other investors would avoid could be a gem for you. Let’s take a closer look at what to know about properties with foundation issues. They could be your next opportunity.

Nature of Foundation Issues

Of course, fixing foundation issues is challenging being that they are underneath the actual property. Moreover, much of the structure of the home is dependent on what it stands on. Therefore, it’s not uncommon to also find structural damage as a result.

The repair costs could outweigh the opportunity of the property, thus making most investors adverse to considering it.

In most states, home seller is legally required to report foundation issues. A good inspection would also reveal this. Some areas have a “caveat emptor” or “buyer beware” requirements where the sellers are not forced to make complete disclosures. Therefore, buyers and sellers equally should know their local jurisdictions regarding disclosure statements.

Moreover, some areas will also require disclosures as to what, when, and how the foundation was repaired. That’s if the property has a history of damage. In short, there’s very little room for the seller to not explain the entire history of the foundation.

Why is this? Well, a good foundation of a home should last its lifetime. Warranties apply and usually stay with the home even after transfer of ownership. Any delineation would not impact the value of the home, but must be reported to local authorities. They could be a larger sign of environmental changes in the area, may require rezoning, or even notification to neighbors that there’s an issue. If escalated, other professionals, like structural engineers, may be brought in to see if there’s a larger problem underneath.

Selling as is

Investors are attracted to purchasing as-is. Yet, investors know that foundation repair (and structural) can be extremely expensive. That said, sellers of homes with foundation issues ought to expect lower offers - and rightfully so. Someone would need to pay for the repairs. Most likely, it wouldn’t be the buyer.

Now, the seller isn’t required to fix the foundation repairs prior. But it is suggested to follow disclosure rules and already have the expectation of lower offers. Whether the property is listed or privately sold, there would be less headaches in the transaction in this case. For investors, expect a far less offer than $.70 on the dollar.

Sometimes, if the market is really hot, sellers may even see more demand for houses, including those with foundation issues. In these cases, investors know they could recoup the costs of repair in the appreciation and cash flow.

Repair costs

Average costs for common foundation concerns is about $4500. That excludes inspections. Estimates do go higher for the severity of the problem and size of the home.

Additionally, depending the homeowner insurance policy, some costs may be covered. Policies tend to cover issues that are caused by another covered risk. They usually don’t cover issues developed over time or were caused by neglect.

Seller Concessions

Always be ready to negotiated. If the inspection comes back determining that there are foundation issues, almost all buyers will want to decrease their offer. Moreover, many contracts include clauses that allows the buyer to back out of the deal contingent on the inspection.

If the buyer pulls out of the deal, the buyer usually loses earnest money.

Nonetheless, the key to an easy transaction is to make sure everyone involved in the transaction are completely transparent:

- Home inspector

- Structural engineers

- Real estate agent (if needed)

- Both buyer and seller

In cases of properties with foundation issues, sometimes there isn’t a buyer for everything. The repairs just sometimes don’t work.

For more information about these investment opportunities, book your consult with our experts today!