First time buying home for investment, foundation issue in 3rd party inspection

[Sriram Suri]

I put down payment on a new LENNAR home in San Antonio area. Closing in 2 weeks, got my third-party inspection done before initial walk. There are many cosmetic issues which can be fixed but had concern from inspector on foundation

Report - "Monitor: It might be wise to get the foundation remeasured within the next year or two to better evaluate the rate of movement. Most homes do most of their shifting/settling in the first five to 10 years. Once the differential gets above two and a half to 3 inches, cracks will form in larger quantities on the walls and ceilings, doors will open/shut on their own and windows will be difficult to open as the frames shift. The structural integrity of the structure could eventually come into question, and repair recommendations may be necessary. A measurement of 1.6" was observed at the home. Although in the normal range, this is higher than normal for a new construction and should be monitored closely going forward."

Inspector and real estate agent say this is not normal and may cause foundation issues in the future. Is this a major concern? Does anybody know what this means and what are my options? I did 10% down on this home to book it. Lennar concierge said she forwarded the report to construction manager and waiting on his response which may take couple of days.

Should i go ahead and take a risk or leave it?

Thank you

[Ghassan Jabali]

Hello Sriram,

I hope you're doing well. Generally, reports should always be reviewed carefully when making decisions on property acquisitions. Based on the report, there is some structural shifting of about 1.6" which is within the normal range, but is higher than normal. This is already more than halfway to the 2.6-3.0" where cracks will form and the foundation may become a serious issue that requires expensive foundational repairs or the demolition of the entire property as it continues to get worse and worse.

Depending on your contract, it can be cause for you to get your down payment/earnest money back. If you do decide that the price is great and the property could be worthwhile then we may strongly recommend seeing what repairs could be done to help correct the issues around the foundation, while they're still at 1.6". We may also recommend utilizing LLCs and Trusts to protect your interest in the property and isolate out the liability of the property from your personal assets and other business asset.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.