Would you offer on a house that has foundation issues?

Rental Property Investor · Lincoln, NE · Member since 2020 · 22 posts · 20 votes

Looked at a house that has sat for over a year vacant that was bought at auction. Has some mold and major foundational bowing in the basement. Should I make an offer or stay away?

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@Logan Merrick

From the sounds of it, you may have limited experience with fixing foundations? If so, get 3 quotes, take the highest one and add a 20% buffer. So 1.2x highest quote. Subtract that from the offer

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Derek Harris
Investor · Austin, TX · Member since 2018 · 192 posts · 104 votes
6y
Originally posted by @Logan Merrick:
Looked at a house that has sat for over a year vacant that was bought at auction. Has some mold and major foundational bowing in the basement. Should I make an offer or stay away?

Logan, does the current asking price reflect foundation repair? If not, I recommend getting a quote from 2-3 foundation specialists and using that quote to negotiate a lower price.

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Logan Merrick
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Rental Property Investor · Lincoln, NE · Member since 2020 · 22 posts · 20 votes
6y
It doesn't. I was thinking about really low balling the offer and seeing how it plays out. Not sure if that's ideal or not?
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Member since 2019 · 1k+ posts · 1k+ votes
6y
@Logan Merrick
From the sounds of it, you may have limited experience with fixing foundations? If so, get 3 quotes, take the highest one and add a 20% buffer. So 1.2x highest quote. Subtract that from the offer
16 Reply
Logan Merrick
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Rental Property Investor · Lincoln, NE · Member since 2020 · 22 posts · 20 votes
6y
@Kris H.
I am completely new to investing, so this is super helpful. Thank you!
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6y
@Logan Merrick
You’ll want a good foundation contractor, one who’s been in town for a while and isn’t going anywhere. Someone doing this for 20 years in the area will be familiar with likely surprises based off soil composition and such. They’ll also be familiar with local permitting etc. It’s a big step for investment #1 so tread lightly.
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Logan Merrick
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Rental Property Investor · Lincoln, NE · Member since 2020 · 22 posts · 20 votes
6y
@Kris H. Thank you! For me, I'm looking to wholesale it. But I still want to make sure that it's a good deal for the person I'm selling to.
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Russ B.
Investor · Cleveland, OH · Member since 2017 · 319 posts · 330 votes
6y
You might want to also figure out WHY the foundation is bowing, and whether it's gonna keep happening - this is probably more important than upfront the repair cost.
If it's built in an area where the houses all have this problem due to the soil, that's pretty bad - you'll probably always have issues. On the other hand, if it's only happening in one spot under a missing piece of gutter (for example), then it was probably just an ice lens that caused it. This would be a relatively easy fix.
I would also not be so distracted by the foundation that you neglect to consider the other issues...
Mold probably means either a bad roof, or faulty construction (in the basement, it might be the same issue as the foundation). While mold itself is not as big a deal as people think, I'd make sure I knew how much damage there really was, and what all will need to be done.
It could be a disaster that you need to avoid at all costs - but if you're lucky, you might be looking at a house with easily solvable problems, that other buyers are scared to touch 🙂
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Logan Merrick
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Rental Property Investor · Lincoln, NE · Member since 2020 · 22 posts · 20 votes
6y
@Russ B. It does have mold! Mold in the kitchen and basement and it's pretty significant. Should I just forget about it and move on? The bowing of the foundation is on all sides of the basement and like I said it has mold. I wasn't sure if just offering little to nothing for the property if it was still worth it or not?
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Derek Harris
Investor · Austin, TX · Member since 2018 · 192 posts · 104 votes
6y
Originally posted by @Logan Merrick:
It doesn't. I was thinking about really low balling the offer and seeing how it plays out. Not sure if that's ideal or not?

Logan, my recommendation is that if you give a low ball offer, I would justify it as much as possible (with projected rehab costs). Be very conservative with your rehab estimates.
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Logan Merrick
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Rental Property Investor · Lincoln, NE · Member since 2020 · 22 posts · 20 votes
6y
@Derek Harris Roger that. Thank you!
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Russ B.
Investor · Cleveland, OH · Member since 2017 · 319 posts · 330 votes
6y
A local real estate agent could probably tell you whether the whole neighborhood has that issue. Seeing it on all sides is obviously not a good sign.
Maybe the ground slopes toward the house? That would also cause it. This could still be fixable, although it might involve bulldozers pushing the yard around. While it's better than having really expansive soil, you'd probably have to get the place for very cheap for that to be worth the effort.
If the house is relatively new, the problem could be something really bad - if it's 50 or 100 years old, it might be less bad.
I mentioned the mold because you did.. meaning, don't forget about it just because the bowing was scarier 🙂
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Tyler RowlandBusiness Member
Lender · Cedar City, UT · Member since 2017 · 88 posts · 64 votes
6y
If that is the only information that you have on the property, then no. Definitely stay away. If the seller is able to offer an engineers report, and give a little more history on the settling, then you can entertain taking the next step.

Settling is tricky, because it can affect so much of the house. Pipes, framing, electrical, etc... It can really cost a lot of money to truly fix it. Even with an engineer report and history, you have got to go into it taking into account what could go wrong. The regular numbers you might collect for Cap ex and Maintenance might need more of a contribution than a home without settling issues.
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Brian Pulaski
Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
6y
Who owns the house now? Is it a person or a bank? If it is a bank you may not be able to wholesale it anyway.
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Logan Merrick
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Rental Property Investor · Lincoln, NE · Member since 2020 · 22 posts · 20 votes
6y
@Brian Pulaski an investor owns it. He bought it at auction.
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Edd Gilbert
Real Estate Agent · Baytown, TX · Member since 2016 · 14 posts · 3 votes
6y
This could be a bit of a challenge for a seasoned investor. I would hate to see someone with no experience get burned and then never invest again. This could be a good JV opportunity.
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Logan Merrick
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Rental Property Investor · Lincoln, NE · Member since 2020 · 22 posts · 20 votes
6y
@Edd words of wisdom! Thank you.
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Mark S.
Real Estate Investor · Saint Paul, MN · Member since 2017 · 543 posts · 474 votes
6y
@Logan Merrick I agree with Edd. If you are experienced at this sort of thing then take a run at it. But for someone without a lot of experience in dealing with houses with major problems, I think you are setting yourself up for disappointment. Take it from someone who’s been there!
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Logan Merrick
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Rental Property Investor · Lincoln, NE · Member since 2020 · 22 posts · 20 votes
6y
@Mark S I appreciate you guys giving me sound wisdom. Thank you!
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Syed H.
Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes
6y
if you have experience, of course. I love houses with foundational issues. Scares away most buyers, especially retail buyers and uneducated flippers. It's nota big deal. Just another thing to fix. Just needs to be accounted for in your offer.
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Gary Parilis
Rental Property Investor · NJ and PA · Member since 2019 · 206 posts · 105 votes
6y
@Logan Merrick I haven't seen anyone ask the obvious question yet: WHY are you considering buying a house with a foundation issue if you're so new at the game? I get @Syed H.'s point... Such a house can be a great deal. But it seems too risky for someone inexperienced. There are plenty of less risky deals out there, and there will be plenty of houses with foundation issues once you've gained experience.
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Logan Merrick
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Rental Property Investor · Lincoln, NE · Member since 2020 · 22 posts · 20 votes
6y
@Gary Parilis great question. I didn't know it had it until I saw it. I then didn't even consider it until I read people on forums saying they shouldn't be rejected because of it. So I thought maybe I should consider....that's when I jumped on here to ask the question.
Update though...took a very seasoned investor who is mentoring me to see the house and he told me "no way!" So, staying far away. Thanks everyone for the insight and help.
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Jonathan G.
Investor · Marietta, GA · Member since 2015 · 382 posts · 258 votes
6y
@Logan Merrick
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Jonathan G.
Investor · Marietta, GA · Member since 2015 · 382 posts · 258 votes
6y
@Logan Merrick
The first potential red flag was that another investor is trying to offload the property as is. Glad someone told you to stay away. Someone seasoned could make the deal work but my suspicion is the current owner/investor is going to get a bit burned on the auction “deal”
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Huso Akaratovic
Flipper/Rehabber · Newport News, VA · Member since 2016 · 128 posts · 54 votes
6y
@Logan Merrick if you are new to investing I would be careful with taking a project on that has so many unknowns, especially when it comes to foundation unless you are getting an amazing deal. So much can go wrong when the foundation is being repaired.
I just recently had a house that I purchased with major foundation problems. The asking price was $95k, and they had a quote on file from a foundation company with repairs being estimated at $30k. I thought that quote was pretty low, but I went on and made an offer anyways offering them $65k. The ARV was approximately $225k with probably $65 k In rehab. After doing more due diligence, and taking to various foundation people, they honestly made me a little nerves and I decided to off load the property for $85k. At the end of the day, I still made $20k without doing anything, but of course I could've made a lot more, however , I didn't want to be greedy. There were too many unknowns. That's why I'm telling you, evaluate this very well, especially since the house was on the market for over a year. Mind you, my property was on the market less then few Hours before I was able to make a deal. I gave them ultimatum to either accept my offer without any contingencies or walk away. Good luck
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James De Stefano
Real Estate Agent · Houston, TX · Member since 2017 · 290 posts · 233 votes
6y
Great and helpful thread! I'm actually considering a low offer on a house here in Houston. It has tell-tale issues w/ foundation, and has been on the market over 100 days. Good layout for a 60 year old home, and has serious potential.
I'm going to put a "conservative" est. for $12,000 for piers into my numbers, although the points made above about other settling issues including plumbing are very helpful to factor in as well!
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