Should You Buy a Home With Foundation Issues? Be Wary But Aware That Solutions Exist

By: , Contributor

Published on: Mar 26, 2020

Foundation repairs can be very costly and affect financing options, but with enough budget, they can typically be fixed.

A number of unexpected issues can come up during the homebuying process, and there are some problems that can turn a dream home into a residential nightmare. Foundation issues can be particularly daunting, but should that keep you from buying the house of your dreams?

While envisioning your dream home, the foundation may not be something you create Pinterest (NYSE: PINS) boards for, but it is arguably the most critical element of the entire structure. And because the full extent of foundation problems are not always visible when you tour your potential new home, and things like small cracks in the walls and chips in the foundation may seem like minor issues to the untrained eye, home inspections are critical in determining how serious the settling problems are and how to move forward.

For those considering buying a home with foundation issues, costs can begin around $3,500 to repair small cracks but can go up to $40,000 and beyond for major repairs or replacement. But as a buyer, you might not be concerned about these costs because you can always request that the seller make repairs to the foundation, right?

But what if they won't? Once you buy the house, for all intents and purposes, it's yours. Additionally, once foundation issues have been discovered and documented in an inspection report, you may no longer be eligible for certain mortgage options, such as government-backed loans, unless they are satisfactorily repaired.

While that sounds like a potential disaster, there can actually be an upside to buying a home with foundation issues. Once foundation issues have been detected and documented in an inspection, buyers often have a bargaining tool to use in negotiations with sellers. Sellers often have to make other concessions to seal the deal, whether it be regarding price or other requested repairs, when foundation issues are detected.

So, if you fall in love with a house with foundation issues, what should your next steps be? A smart move would be to have the foundation inspected by a structural engineer after your initial home inspection, according to homeadvisor.com. Home inspectors are a great first step in the process of detecting and dealing with foundation issues, but they are usually only qualified to see the basic indicators of foundation issues.

Structural engineers are specially trained to determine the extent of foundation issues and provide a more accurate estimate of the costs to repair. Also, keep in mind that this is no task for the DIYer. And in fact, home insurance companies and many mortgage lenders require documentation that foundation issues have been fixed by an insured professional.

Buyers also need to talk to their mortgage lender as soon as they learn about foundation issues. Regardless of whether the buyer or seller pays for the repairs, mortgage lenders often require that these repairs are completed and documented prior to the close.

However, there are rehabilitation loans which may allow for the repair of certain foundation issues after the sale of the house. Typically, the lender finances the house for what it is anticipated to be appraised for after the foundation work is complete, and the difference in the home's price and the mortgage is used to pay for the repair of the foundation.

While foundation issues may cause some potential homebuyers to lose sleep at night, there can be ways to manage the financial burden of repairing a foundation, and some buyers may be able to negotiate a great deal because of foundation issues. And promisingly, in nearly all cases, house foundation issues can be repaired, if there's a big enough budget involved.

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Marc Rapport has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Pinterest. The Motley Fool has a disclosure policy.

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