Bad Foundation - Who is right here?

8 Replies

Hello!  I am in the option period on my first flip home and have come across a bit of a quandary.  The seller and I don't agree on the foundation issues in the home and I am looking for any clever solutions to work through this. 

I want to remove my bias here, so I will stick to the facts:

  1. Home had foundation repairs done in 2008 and 2012
  2. Seller had a 3rd party engineer do a class C foundation inspection on 3.20.2018 and provided the following:
    1. Overall elevation differential of 4.1 inches.  
    2. Master bedroom had a low points ranging from -0.7" to -3.5"
    3. "The house has experienced settling of the foundation"
    4. "It is my opinion that the foundation remains structurally sound and re-leveling is not required at this time.

During our inspection of the home we came across the following:

  1. Noticeable sloping when walking around.
  2. Buckling hardwood floors in the master bedroom
  3. Cracked and delaminated tile in the master bathroom
  4. Cracked bricks and mortar joints on the exterior
  5. Home inspector said there is definitely evidence of foundation movement
  6. Permapier came out to provide a free estimate and evaluation and suggested multiple piers along master bedroom as well as some other areas of the home.  Estimated approximately 10k in repairs.  These repairs were inline with the work that was previously done in 2008 and 2012 by a separate company.

Now here is the funny part...

The seller and the seller's agent both believe the home doesn't have any foundation issues because of the engineer's letter despite the visible damage and the home inspection and the pier company's investigation.  I am a little caught off guard as any buyer is going to bring these same issues to the table.  It would be one thing if they wanted to argue the amount they were going to settle for repairs, but they are simply negating them all together.  Obviously our rehab budget for this home doesn't have any wiggle room for 10k of piers.

Does anyone have any clever ideas to help convince these sellers that this is going to be an issue with any buyer, so might as well settle it with me rather than someone else?

Thanks!

Most likely

Seller underestimates foundation issue

Buyer overestimates foundation issue

Truth lies some place in the middle

Personally I would concentrate on offering what I feel comfortable paying 

If the seller won’t sell at that price I would move on

If you see the price comes down in the future because no other buyer will pay what they want you could buy it then 

@Ryan Moret The first thing that jumped out at me was that foundation work was done in 2008 and 2012.

Presumably, the 2008 work corrected whatever issues were present at that time.  If that's correct, why is more foundation work needed just 4 years later?

At this point, the seller's agent has been made aware of the defects.  Unless real estate law is dramatically different in TX than it is in MA (and it could be), he is under a legal obligation to disclose these defects to other buyers.

That said, I'd walk away.  Those kinds of problems are a lot to take on for a first flip.

Stick with asking for what you need for the deal to still work for you. If the seller doesn't budge move on. If the house is still on the market in another 2 months contact them again to see if they have changed their mind. 

Did the company you got the estimate from give you any indication why the house still has foundation issues after it had foundation work done in 2008 and 2012?

Hi @Ryan Moret ,

Generally speaking I would trust a structural engineers opinion over a home inspector when it comes to foundation issues. That being said you each hired someone to give an opinion, trust in your guy, but don't expect them to trust your guy over their own expert. It is no different than them asking you to ignore your experts findings. I have had differences of opinion (often as all agents do) and you have to believe in your specialists.

Also a "free estimate" from someone wanting to get the business is just that. Ask the company that did the work in 2008 and 2012 and I would guess you get an "all clear" as well. Sloping and mortar cracks as well as noticeable settling are all common. When I see them I recommend my clients have an engineer evaluate them and see if they are just settling or an issue that needs attention. Pay an engineer to go out and see what they recommend.

Good Luck

@Ryan Moret

You are going to pay a lot more for this house than I would and I have my own crew and I have been at this for 28+ years.  A few things to consider:

-You are now required to disclose the information you now know to any potential buyers

-This house has had 2 foundation repairs and potentially a 3rd with you.  Saying that, this house will always have a stigma and whichever comps you are using will need to be discounted as this house will never sell at the price of comps

My suggestion is that you bail

Going back to your title, it doesn't matter who is right. It only matters that you buy it at a price that allows you to fix the foundation, take the stigma hit on the ARV, and still make a profit.

Given that you are brandy new, I don't suggest this as a first project, because it's almost a guarantee that you will do one (or more) of the following:

1.  Pay too much

2.  Underestimate repairs

3. Overestimate ARV

That's all normal, but when you do it on a house where you know from the start that there are major foundation issues, you are setting yourself up for losing money.  Not a good first project, I agree with @Greg H. , you should bail.

There isn't much getting around an engineer's letter from only 2 months ago.  The foundation is structurally sound.  Period.

What does that mean? The slab is not cracked, is whole, and continuous.  Instead of bits coming off and shifting, the whole plate is shifting.  There are low spots.  These get filled with floor leveler (that is a real thing, not a gag).

Like Michael said, offer what your numbers tell you to buy it at and move on.