Advice On Property With Foundation Problems
Hi eveyone,
I'm very new to re-habbing (this would be my first property). I found a property that needs major foundation repair (walls cracked, big crack in ceiling, floor noticeably sloping) and needs central air installed. Property is offerred for $105K, and seller says he will fix foundation and install AC. But I will have to do any and all cosmetic work (including fixing any damage to walls, ceiling, etc from foundation problems). Property also needs new flooring. Properties in the market sell for $125K-$130K. Adding in cost of holding, selling, closing, and about $10K for repairs I will have to do, I am thinking of offering $80K all cash. Two questions ... should I pursue this deal or is it too risky for a newbie like me, and if I do pursue, how do I go about making sure the foundation issue is completely fixed.
Thanks for any advice!
Personally, I walk away from anything with a foundation problem thats sounds as extensive as you are talking about. Aside from the extensive repair cost, the property value is lower unless you can completly get rid of the sloping floors and any signs of the structural problems. Houses that are "jacked up" in the basement often cause buyers to walk away. This is only my own personal experience and opinion. I'd look elsewhere. Number one on my list for rehabbing is "structural condition". [ Edited by Sandbahr on Date 12/08/2003 ]
Foundation problems are a real issue here in Texas.
There is a company here in Austin called Centex House Leveling. 512-444-LIFT The owner is an RE investor himself and is really helpful. He also partners up on some deals.
Don't know if he works in Dallas, but worth giving him a call.
Good Luck
[addsig]
Russ,
I'm still fairly new to the rehab scene, so take this advice for what it is worth.
In the past 6 months, I have looked at 100+ homes in the Dallas area. Out of all these homes, I doubt more than 10 had no foundation issues. Unfortunately, the Texas soil roughs up homes a little bit and there isn't much you can do about it.
If you are good at drywall work, it will not be a huge problem once the foundation work is done. Be aware that things still settle a bit and you may need to do a little touch up work later. I was busy doing some at 3am yesterday before I did a home showing at 8am . Tape/Bed/Calking can make cracks disappear and it is very cost effective. However, if you aren't good it will NEVER look right and will be detectable!
Since I haven't seen the home and don't know the extent of the damage, it really is hard to judge if your asking price is correct. You should be able to get a very low offer accepted, because cracks scare people away like you wouldn't believe.....
-Chris
[addsig]
I don't know how different Texas is from Colorado in regard to real estate. But we have expansive soils here also (bentonite clay) so structural problems come up.
Let your exit strategy guide your journey.
What are you going to do with the house afterwards, if you are going to sell it then think about you buyer. How will your buyer purchase it? If FHA, they won't insure a house with structural damage so you better make sure that the house will pass the FHA inspection.
The only way to do that is to have it inspected before you purchase it. If the seller is going to fix the structural issues before he sells it to you this is great, just make sure that the deal hinges around you closing only after the house passes a structural engineering inspection.
You will want a copy of the engineers report to make selling the house easier, since you will have to disclose the structural damage to your buyer.
Now you have me interested. I have found that most foundation problems are caused by improper original foundation.
Here in LaLa land the soils vary a great deal and I finaly reached the point where prior to purchase I went out on the lots and dug my own holes and peered into them, some of which I climbed down into and then if it was necessary and in some cases it was put cassions down some with beveled bottoms, Yes it is a California thing something to do with movie stars.
Actualy when your soil is trying hard to make molecular changes you bevel the bottoms so they can handle the stresses. The grade beam that ties them all together must also reflect proper calculations.
However in the Hills of Hollywood I have made some wonderful buys on houses that were about to change Zip Codes. Just a little engineering and a lot of knowledge and the solution is usualy pretty simple. I won't bore you but, before you walk away educate yourself on the solutions and you just might pick up a goodie, really makes your day.
Oh yes, if in California near the Beach, learn Chinese for those really deep cassions over 60 feet deep.
Concrete Lucius
Yes, it is a similar issue here in Texas. Our problems are rooted in the clay soil in combination with severe weather conditions.
During the summer, it is VERY dry, and the clay will contract. When it eventually does rain here, it pours and the clay quickly expands. Seldom does happens uniformly which results in the damage.
Anyhow, I'm not a foundation expert. I just learned a little to know how much it is going to cost me to get it fixed
-Chris
[addsig]
You guys are great! Thanks for all the information.
Hey and Howdy -
I would first question why the seller didn't fix the foundation problem before putting the property on the market. And I Really Question the quality of the work that you would get if you were to allow him (or her) to make the repairs.
I figure that I make my money by solving other people's property problems - and therefore, I insist on hiring my own workmen and doing my own repairs.
Also, the bid process is an education in itself! Just talking to the contractors about the various projects can save you hundreds and thousands of dollars over time.
Best of Luck
If you're in an area where most all foundations haver problems... I'd call that fellow investor a few posts up who fixes foundations.
From where I'm standing, you're going to have to learn how to deal with them as they're common in your area.
Thanks,
OnTheWater
my input is simple (everything else has been addressed above). first, only you know if it's too risky for you. it all depends on how much you can handle.
i'd drop that cash offer by another 10k too. even if you're sure you can fix it for that, why not have some extra to cover your trax. besides, like everyone said, structural probs make it hard to sell anyway, both for the seller now and for you when you buy (disclosure).
good luck.
Quote:
On 2003-12-08 17:48, Russolivier wrote:
Hi eveyone,
I'm very new to re-habbing (this would be my first property). I found a property that needs major foundation repair (walls cracked, big crack in ceiling, floor noticeably sloping) and needs central air installed. Property is offerred for $105K, and seller says he will fix foundation and install AC. But I will have to do any and all cosmetic work (including fixing any damage to walls, ceiling, etc from foundation problems). Property also needs new flooring. Properties in the market sell for $125K-$130K. Adding in cost of holding, selling, closing, and about $10K for repairs I will have to do, I am thinking of offering $80K all cash. Two questions ... should I pursue this deal or is it too risky for a newbie like me, and if I do pursue, how do I go about making sure the foundation issue is completely fixed.
Thanks for any advice!
Assuming that your comps are based on houses that do not have any foundation issues, you should realize that there is a value adjustment in buyers' minds when they purchase a house with foundation issues--fixed or not.
In other words, if there are two houses exactly the same, except one house had foundation issues that have been fixed, would you pay the same amount for that house? Neither would the average Joe. So, try and quantify that adjustment and subtract it from your market value. If this is 10% then your market price would be ~ $115,000. Subtract your repair costs, holding costs, selling costs, AND THE PROFIT YOU WANT TO MAKE, and the new value is the HIGHEST amount you can offer on the property.
I would suggest purchasing the house "as-is" and discounting the purchase price by the amount it will cost you to do the foundation work yourself. Get several bids in writing and present these with your offer. If it is as bad as you say, he may not bite now, but when he realizes no one esle will even look at it, he may call you back later. If this happens, discount your offer even more knowing he is desparate.
Jace