3 Parts
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CHAPTERS

2 Ways of Selling a House with Foundation Issues

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Even though the information on this web page is provided by a qualified industry expert, it should not be considered as legal, tax, financial or investment advice. Since every individual’s situation is unique, a qualified professional should be consulted before making financial decisions.

In this article, we will discuss two successful methods of selling a house with foundation damage.

In over 20 years of my property investing career that involves all kinds of renovation, I’ve seen problems like this overcome with the right strategy.

Let’s look at the best way for you to sell your house.

Overview
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How to Sell a House with Foundation Problems?

Simply put, there are 2 ways to sell a house that has foundation damage. The first way is for you to fix the damage yourself and sell it to the general public, with or without a broker. The second way is to sell the property as-is.

There are pluses and minuses to each method that will help you determine which strategy is best for you.

When you sell the house as-is, you avoid the time-consuming process and out-of-pocket expense of fixing a major problem. But, selling your house in this condition will mean accepting a price that is lower than if the foundation were in good shape.

If you have the time and funds to fix the problem before selling, you can market your property the traditional way and get a higher price. That is if you have the time and funds. Taking care of something like this can be like taking on a second job. Some people have the time and skill to do that, but most people don’t.

Your decision will be affected by your background and experience, and your financial situation. It may also depend on how much work it will take to put your house right.

To see exactly what this means, let’s dive into the details of selling your house with a bad foundation.

Way 1: Sell Your Home As Is
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Listing Your House on the Open Market

Your house can be sold as-is, but obviously you need to target the right potential buyers. Should you list it with a broker? Can you list it with a broker?

 

Will a Broker List Your Home As Is?

Selling your house the traditional way, to the general public on the open market, is challenging if your house needs foundation repairs. An experienced broker will know this and will recommend that you fix the problem first. After all, their livelihood is dependent on the most effective use of their time.

At that point, the seriousness of the foundation problem and the amount of cash that you have will largely determine your options. If the foundation repairs aren’t that big, and you either have the funds or can borrow them, then fixing the problem and listing the home with a broker is a good choice.

If you can’t afford the repairs and selling as-is is your only option, it will be difficult to find a traditional broker willing to list a seriously damaged property. Here are some of the things that they will have to consider.

Sometimes the foundation problem is evident. If it has caused the doors to stick or a crack to appear in the masonry, it will turn off most buyers right away.

The majority of homebuyers have just enough money for their downpayment and closing costs. They are only looking for a move-in ready home. If they have to use some of their down payment money to fix your problem, they may not be able to borrow enough for the purchase.

If they can spend some of their funds on repairs and still get their loan, it might raise the loan to value (LTV) higher than 80%. This means that they will have to pay private mortgage insurance which will increase their house payment.

In any home purchase, the buyer will most likely make the sale contingent on the result of inspections of the property. In most states, it works like this:

  • The buyer can request that problems found by the inspector be fixed by the seller
  • The seller can either agree or refuse to fix the problems.
  • If the seller refuses, the buyer can walk away.

For all these reasons, most local real estate agents will not be interested in selling your house as-is when it’s in bad condition and needs major repairs. You will likely have to sell your house as a For Sale By Owner, or FSBO property. This means that you will not reach the largest possible number of active buyers.

 

How Can a Buyer Finance a Home with Foundation Problems?

If you do find an interested buyer on your own, how do you close the sale with such important repairs needed? You can offer the buyer a credit for the needed work or agree that funds from the sale will be escrowed and only used for the needed repairs after closing.

However, the appraisal will not arrive at the full value before the repairs are done. A conventional mortgage lender will not want to close on a property that is not worth the full value at the time of closing.

A knowledgeable buyer might consider other forms of financing such as a construction mini-perm loan or a bridge loan that will let them buy the property before the problem is fixed.

These types of loans would most likely require having plans made, entering into a construction contract with a licensed contractor, and applying for permits. If they use a bridge loan, they will have two closings. All of these options will result in more costs for the buyer.

The typical homebuyer is confused enough with a standard conventional mortgage loan. They aren’t likely to choose your home to buy if there are other choices in the area. You’ll need to find a buyer who is used to this situation and who knows how to close on an as-is property.

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Selling Your House to a Real Estate Investor

If traditional buyers aren’t the answer, then what would the right buyer look like?

  • If you can find a buyer who is experienced in buying properties, then a broker wouldn’t be needed.
  • If your buyer has all cash to make the purchase, then you wouldn’t have to worry about a mortgage lender’s concerns.
  • And, if that buyer has construction and repair experience, they can minimize the costs of making repairs which will make your house more attractive to them.

We’ve just described a real estate investor. Real estate investors are in the business of buying houses that are available below market value because of deferred maintenance, functional obsolescence, or major repairs.

Investors pay all cash for these types of homes, and then make the repairs themselves. This increases the value of the property beyond their costs.

Some investors buy properties to fix up in order to sell them right away. These are called house flippers. Their business model is to make short term investments and get their profits from the sale of the house.

Other investors hold their properties over a long time and rent them to tenants. Their plan is to recapture their investment over time with rental income and/or eventually sell the property after it has appreciated in value.

 

Advantages of Selling to a Real Estate Investor

The best things about selling to an investor are:

  • Investors pay cash which removes any lenders’ requirements and the uncertainty that your buyer may not qualify for their loan.
  • Selling to an investor takes much less time because they handle their own inspections, are able to negotiate with you directly, no lengthy loan processing is involved, and you don’t spend time marketing your property.
  • You avoid having to pay cash out of pocket for repairs or marketing FSBO. You can even sell a condemned house to an investor and they will take care of all repairs after the transaction no matter its condition.
  • Investors don’t charge commissions or other fees that you typically have to pay in a traditional transaction.

 

Disadvantages of Selling to a Real Estate Investor

The downside of selling to an investor is:

  • An investor’s offer will be below market value.

An investor has to calculate the cost of repairs and their time involved in managing those repairs before the property is ready to sell or be rented. This means that they can’t pay market value and still meet their business model.

To learn more about how using investors works for homeowners, you can read our article Selling Your House to a Real Estate Investor the Right Way.

 

Where to Find a Reputable Real Estate Investor?

If by now, you have decided that you would consider to sell your house fast and for cash to an investor, you likely want to know how to find a good investor to have the deal completed professionally.

The best way to find a reputable investor in your area is to request a cash offer from HouseCashin. As the US largest national platform connecting home sellers with real estate investors, we have connections with professionals throughout the country.

Fill out our form to get multiple offers on your property from local investors vetted by our quality standards and choose the best one.

Way 2: Repair Your Home and Sell It Traditionally
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Costs to Repair Different Types of Foundation Issues

Foundation problems are caused by a number of issues including poor soil compaction, expanding soils, extremely high or low temperatures, and frost heave.

Excessive moisture is a major cause of foundation damage. This can be the result of flooding, plumbing leaks, basements located in areas with a high water table, and poor drainage around your house. Once a foundation or slab cracks from settling or pressure, if water gets into the crack, it will worsen the situation.

Different areas of the US can have soil or weather conditions that make that region’s foundation issues unique to the area.

Signs that you may have foundation damage are cracks in masonry and walls, doors that stick or won’t open, openings or gaps around window frames, uneven floors, and cabinets that show separation from the wall.

Before anything can be done, a structural inspection should be performed by a certified structural engineer. This will cost in the neighborhood of $500 – $700.

Here are some of the most common types of foundation damage and approximate costs to repair them.

 

Foundation Settling

Foundation settling is caused by soil problems. The builder may have failed to properly compact the soil before building. Some soils compact naturally more than others, such as clay. Large amounts of moisture in the soil caused by heavy rain, flooding, poor drainage around your foundation, or even leaks within the house can affect the soil and cause settling.

If your house is built on a slab, you may be able to restore the house to its original level condition by a process known as mudjacking, or slabjacking. This involves cutting holes in the slab and injecting a concrete or polyurethane mixture called mud beneath the slab through the holes. The mud mixture hardens creating solid support for the slab, leveling it, and preventing further settling.

Mudjacking can cost from $500 to $1,500.

If your house is on a crawl space, the process is more difficult and more expensive. Your contractor will have to raise the foundation, do some excavation work, and then insert piers as far as 20 to 35 feet into the ground with hydraulic jacks. This is called underpinning.

Piers are 10 to 11 feet long and are either made of pressed concrete or steel. They can cost from $500 to $3,000 each. If caught early, your house may only need 6 to 8 piers. More extensive jobs can require the use of more than 25 piers.

Examine all foundation contractors’ proposals carefully. Some of them will give a quote based on not having to extend the new piers more than 20 feet. If your piers have to go farther down, it will cause cost overruns that you may not be prepared for.

You will also need beams and other materials for the final connection to your home’s structure.

 

Stabilizing Walls

If you have a basement, your walls may need to be stabilized. If you can see bowing in the walls, this will certainly have to be done. The foundation specialist will use either carbon fiber or steel strips to do this. Carbon fiber can be used if your problem isn’t severe, but steel will have to be used if the bowing is significant. Your engineer or contractor will make this determination.

Depending on which material is used, the cost can be between $3,500 and $14,000 for a dozen strips.

 

Water Sealing

All types of houses may require work to prevent further water damage. Homes with basements, crawl spaces, and slabs may need to have this waterproofing done, in addition to the repairs mentioned above.

This can involve a number of corrective measures. Some or all of them may be needed for your house. They include digging out space next to your foundation and applying a waterproof sealant, installation of drains, and gravel next to your foundation to divert water. You might have to re-grade your yard to provide better drainage.

Depending on your needs, the cost can be from $2,500 to $6,000.

 

Average Foundation Repair Costs

Surveys of insurance companies and repair specialists show that the average cost of foundation repairs is about $4,500. However, the range of problems that are included in this number is from $500 to $650 to fix minor cracks to $10,000 to $15,000 for repairs that involve hydraulic piers.

If your home has foundation issues that are serious enough to cause you problems selling your house, your costs will probably be at the higher end of the range.

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Should Foundation Repairs Be Disclosed?

Other than disclosures for lead-based paint, which is a federal requirement, your state determines what has to be disclosed when selling your home.

Some states only make you disclose current problems. Other states will make you tell about any major repairs that you have made since you bought the property. You will need to research your state’s regulations and obtain the disclosure form that you will have to fill out and give to the buyer.

Regardless of what the disclosure laws are in your area, a smart buyer or broker can get a free copy of the Comprehensive Loss Underwriting Exchange form describing all homeowner’s insurance claims that you have made over seven years. And, you can be sure that a good home inspector will notice any evidence of major foundation repairs.

In today’s litigious society, any problem that can reoccur in the future should be disclosed to a buyer in writing.

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How Hard Is Selling a Home After Foundation Repair?

This could depend on your part of the country. In some markets, homes with foundation repairs are common and therefore your house is not atypical compared to your competition.

It will also depend on the cycle that your market is experiencing. Is it a buyer’s market, or a seller’s market? If you are in strong competition against houses without foundation repairs, then you can’t expect to get the highest value for your home. In a buyer’s market, you may have trouble selling it at all.

Perception is critical when selling a house. If someone thinks that they can avoid potential future costs, even if they are only perceived costs, they will avoid them entirely.

You can mitigate your situation by having a transferable warranty supplied by your foundation repair contractor. This is a strong reason to carefully select your foundation repair specialist.

Make sure that they warranty their work and that the warranty is transferable to a new owner. Pick a foundation specialist to do your work that has been around long enough that you can expect them to still be in business when you sell your house.

Whether you are experiencing problems with selling your house after a foundation repair or with current foundation problems, the easiest way is to request a cash offer from HouseCashin.

Fill out our form to get up to five cash offers from reputable real estate investors looking for homes in bad condition to buy as is and fix up. After accepting the best one, have your house bought within 3 to 30 days.

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Written by Brian Robbins

With over 20+ years of experience in real estate investment and renovation, Brian Robbins brings extensive knowledge and innovative solutions to the HouseCashin team. Over the years Brian has been involved in over 300 transactions of income producing properties across the US. Along with his passion for real estate, Brian brings with him a deep understanding of real estate risks and financing.

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