Damages To Property 2 Weeks Before Closing
Ok, many of you may not know about this problem since you may not be familiar with sinkholes, but here it is:
We started short sale process in January and we have recently come to an agreement with the bank. The owner just went to court today and got an extension for the sale date for 45 days. We are scheduled to close in 2 weeks and the owner called us up this weekend and said we need to come look at the property. When we arrive, the right side of the house is seperating from its foundation. Ther are several cracks that run from the roof to the ground (1 of the cracks is very wide), several cracks in drywall where tape lines are, and 2 cracks running along the bottom 2 blocks from the front of the house to the back. We have not seen the property in a couple of months but even in that amount of time this has settled fast (considering the house is 20 years old). For this reason, we believe there may be a sinkhole on the property (it is in Zephyrhills and sinkholes have occured on properties in the area).
The bank told us to resubmit a new offer based on the repairs needed. After calling some foundation companies, the repairs can cost $10k-80k (depending on whether or not it is a sinkhole). The only way to find out if there is a sinkhole is to have an engineer report which costs $5-7k. So to get a more accurate quote, we are having the owners file a claim on insurance.
Long story short, has anyone had experience with damages to properties they are trying to purchase? Are the banks willing to discount the property or would they rather have an insurance claim? The insurance claim for a sinkhole can take a year to resolve. The problem is that if the sinkhole costs $20k to repair, it can depreciate the value of the house by 25+%. Do you think the bank will lowere their price for just the repairs or the decrease in value too?
I will try to keep you posted on how this turns out. I have bought/repaired sinkhole properties but have never had something happen to a house while under contract.
Yes they have lender placed insurance since they did not renew theirs. We are currently having them place a claim on the insurance, which an adjustor just came by, so that we can get the engineer report. If there is a sinkhole, we are thinking of having them claim it on insurance to cover the expenses but this could take a year. If its not a sink hole, we are just going to lower our offer by the highest estimate we get. If there is a sinkhole, the cost of damages exceeds the cost of repairs because there will be a loss of value due to the property being labelled a "sinkhole home".
Long story short - do not buy a property with that big a foundation issue. You are doomed to regret it.