While finding your dream home is exciting, discovering foundation problems during the inspection can be disheartening. Signs like cracks in the walls, uneven floors, or doors that don’t close properly can all signal foundation issues, which are all important to address before buying.
But don’t despair – this doesn’t have to derail your homeownership journey! If you’re in the market for a new home and discover foundation issues, here’s what you need to do.
Let Your Home Lender Know
Tell your lender right away if you find foundation problems. Depending on the lender, you might qualify for a loan that covers both the purchase and repairs.
Since private lenders pay less attention to a property’s livability, they are less likely to lend you money to repair the problem. They will also ask you for proof of the repair before closing the loan.
Government-backed mortgage programs like USDA, VA, and FHA loans have strict structural requirements. In this case, you may only get the loan once the property meets the structural soundness these programs require.
Consider a Rehabilitation Loan
A rehabilitation loan is a great alternative to conventional home loans if you buy a home with structural issues. Your options for this home financing solution include VA renovation loans, USDA rehabilitation loans, and FHA 203K rehabilitation loans.
VA renovation loans are for qualifying service members, while USDA rehabilitation loans are for homes in USDA-approved areas. You may take a 203K rehabilitation loan to cater for repairs that can improve the home’s livability.
Agree to an Escrow Holdback
If there are minor foundation issues, you might be able to do an escrow holdback. This means part of the seller’s proceeds are held until repairs are done. With this agreement, the closing process will take place as planned, but the lender retains part of the seller’s sale proceeds to pay for the repair costs.
If you choose to pay for the repair costs upfront to speed up the closing process, you’ll need to put funds into escrow. Showing proof of the repair work will help you get compensation. The escrow holdback agreement outlines the work, costs, deadlines, and payment schedules – which must be signed by both parties and approved by the lender.
Negotiate a Discount on the Price of the Home
If you find foundation issues on a home you really want to buy, try negotiating a lower price with the seller based on the structural engineer’s or home inspection report. If the report reveals foundation issues, the seller has to disclose them in the sale negotiations by law.
If the seller won’t or can’t make repairs, you can usually negotiate a lower price or buy the home “as-is.” This means you’ll cover repair costs yourself after you purchase the home, but it can result in a better deal for you overall.
Know When to Walk Away
As heartbreaking as it may seem, sometimes walking away from a deal is the best option if you have encountered a home with foundation issues and the seller refuses to make repairs or negotiate on the price.
Knowing when to walk away is key, as some homes may not meet your expectations. You may be able to get your deposit back if the sales contract includes contingencies for appraisals or home inspections, or if there’s evidence of undisclosed repairs.
Additional Tips
Don’t brush off even small foundation problems. They can get worse over time, leading to bigger and pricier repairs down the road.
When planning your home purchasing budget, make sure to include all possible repair costs. And always make sure any agreements with the seller or lender about repairs are written down clearly before you purchase. It keeps things clear and avoids any confusion later on.
Schedule a Foundation Repair Service
Foundation issues don’t have to ruin your home-buying experience. Address them quickly to ensure a smooth closing process for you and the seller.
You can count on Pinnacle Foundation Repair for expert foundation repair services. If you have any concerns or doubts about the home you are purchasing, contact us and we’ll do a free foundation examination and follow-up inspection of the home for you.
