A bad foundation, is it good for me?
I found a property that has a foundation issue.
At first, I was turned off and passed it over.
Doing some Google searching I see they also tried to sell this property in 2014 (at a higher price) but it did not sell.
It has been sitting on the market now for a few weeks. The listing agent says they had an offer but the financing fell through.
I am wondering if financing this property with bank financing would be possible? I doubt many conservative Canadian banks are lining up to lend on properties with foundation issues and that may be why the buyers financing fell through.
I am a cash buyer, so getting financing is not an issue. I know the foundation is fixable for about $50k so obviously I will take that into consideration when making an offer.
I'm am just wondering how much of a disadvantage it is for the seller that people might not be able to get financing.
Robert Gunther it depends on your exit strategy. I love foundation issues and I currently looking at two properties for fix and flip with foundation issues. Here in the States, most conventional loans won't qualify since the house as is can't pass an inspection. I will get it fixed by a reputable repair company that offers a lifetime transferable warranty. The house then qualifies for conventional financing. My experience is a small portion of buyers 10% or so will be just turned off since it will be disclosed, another 10% or so will try to think since it was there you should accept a lower price, but the other 80% don't care since it's now fixed and they have the warranty.
I was looking at buying the unit for rental. Good feedback, making sure the repair is guaranteed and transferable is an important consideration as at some point I may want to sell the property.
@Robert Gunther It will depend on the condition of the property overall and how bad the foundation issue is. If the house appears to have issues and can't be lived in the way it is, traditional lenders won't touch it, but some alternative lenders still might. Speak to an experienced mortgage broker, your realtor should be able to recommend someone they work with. They might not be getting your business on this, but you never know in the future.
I think foundation issues are worth buying, if you know what you are doing and get a good enough price for the risk. If it costs $50k to fix and you're only getting a $50k discount, it's not worth it. Fixing it may reveal other problems that need to be fixed. Foundation issues scare most buyers away, so it can give you an advantage. Even a semi-competent realtor can walk a client through an old house and talk about "good bones". That's much harder to do when there are structural issues, and it scares most buyers away. So it may be an opportunity for you.
Good luck!