What You Need to Know About Buying a Home with Foundation Issues

By 

Josiah Wilmoth

Updated 

October 1st, 2020

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So you've discovered potential foundation issues with the house you're interested in buying. This shouldn't be an automatic deal-breaker, but it will require further investigation by a qualified structural engineer to diagnose the severity of the damage.

Depending on the scale of the problem, foundation issues could actually present an opportunity to get a better deal on the house. Your agent may be able to negotiate a lower sale price or concessions that more than compensate for the associated repair costs.

This guide covers everything you need to know about buying a house with foundation damage. Learn how to identify common issues and estimate repair costs, how these problems can affect your mortgage options, and how to turn a headache into an advantage at the negotiating table.

Is it safe to live in a house with foundation problems?

Yes, in most cases it's safe to live in a house with foundation issues.

Foundation problems are generally not a sign that the house is in danger of collapsing. Instead, they’re a concern because foundation issues can cause side effects like mold, or they can hurt the home’s value when you try to sell in future.

Serious foundation issues also don’t happen overnight. They start small and worsen gradually over years — which is exactly why so many homeowners neglect them.

If you're concerned about the safety of a home with apparent foundation issues, you should hire a structural engineer to inspect the foundation. The engineer will diagnose any damage, including hidden problems the average person might miss; recommend repairs; and — most importantly — tell you whether the home is dangerous in its present condition.

Should you buy a home with foundation issues?

You should consider a house with foundation problems if...
  • You're willing to put in time and effort to get a deal.
  • You're not afraid to walk away from a negotiation — even if you've already paid for an expensive foundation inspection.
  • You have the flexibility to navigate a loan process that could take twice as long as normal.
You may want to avoid homes with foundation damage if...
  • You're looking for a turnkey home.
  • You have limited cash for inspections and repairs.
  • You're in a time-crunch — for instance, if you need to sell a home or move by a certain date.

It’s quite likely that you’ll encounter a house with foundation issues during your home search: an estimated 25% of all U.S. homes will suffer "structural distress"like foundation damage during their lifetimes, with 5% enduring major problems.

More than half of all home buyers consider foundation issues a "deal-breaker" because foundation problems can make the home-buying process more complicated and risky.

You’ll have to pay up front for a structural inspection, and depending on what the inspection uncovers, you could face further costs or a tough negotiation with the seller.

You may also have fewer mortgage options — options that require a lot more time and paperwork — if you plan to finance the cost of the repairs.

However, it would be a mistake to dismiss properties with foundation issues out of hand.

Because fewer buyers are willing to purchase these properties, you face less competition and may be able to negotiate a better price. And in many cases, that discount may be larger than what it costs to repair the damage.

Besides, if you discover your dream home has foundation issues, it's best to see how much it costs to fix, rather than writing the house off immediately.

What if the house had previous foundation repairs?

You might come across a house with disclosed foundation issues the owner claims they've already addressed. While it's not common — only 7% of homeowners say they've made structural repairs— it's usually a good thing.

As this chart demonstrates, most foundation types should last for the lifetime of the structure, barring defective construction. That's true of quality foundation repairs too.

Source: International Association of Certified Home Inspectors

But you shouldn't just take the seller's word that the damage has been fixed properly.

Ask for proof the repairs are under warranty. Verify that the warranty is transferable — and that the company guaranteeing the workmanship is still in business.

Even if the repairs are covered by a transferable warranty, that warranty only applies to the section of the foundation the seller fixed. So you should still treat the home like any other property with foundation issues.

Hire a structural engineer to inspect the foundation for damage that hasn't been repaired. The inspector will also assess the quality of any previous work.

Can you get a mortgage on a house with foundation problems?

Most lenders will not underwrite conventional mortgages for houses with serious structural defects. However, select mortgage programs allow home buyers to finance distressed properties with foundation issues — and even borrow the funds to pay for the repairs:

  • FHA 203(k) Loan (often called an FHA Rehab loan)
  • Fannie Mae HomeStyle Renovation Mortgage
  • Freddie Mac CHOICERenovation Mortgage

Typically, buyers with good credit will incur fewer upfront expenses with a HomeStyle Renovation or CHOICERenovation mortgage. The FHA 203(k) loan is usually best for buyers who can't qualify for the other financing options.

Mortgage ProgramKey Benefit(s)Key Drawback(s)Best for...
FHA 203(k) Loan
  • Lowest minimum credit score: 500
  • Higher closing costs and more mandatory fees
  • Owner must occupy home
  • Home buyers with poor credit who cannot qualify for other loan programs
Fannie Mae HomeStyle Renovation Mortgage
  • Lower closing costs and fewer mandatory fees
  • May be used to finance investment properties
  • Higher minimum credit score: 620
  • Home buyers with good credit
  • Investors
Freddie Mac CHOICERenovation Mortgage*
*Note: The Fannie Mae HomeStyle Renovation Mortgage and Freddie Mac CHOICERenovation Mortgage programs are very similar. One key difference is that the CHOICERenovation loan explicitly covers disaster preparedness upgrades like foundation retrofitting.

No matter which rehabilitation mortgage option you choose, you'll likely encounter several drawbacks compared to conventional loans:

  • Higher interest rates and closing costs
  • Longer closing timelines
  • More paperwork
  • Fewer lenders that offer these loan options

You'll also need to have your entire renovation plan in place — including firm, detailed bids from contractors — before your lender will give you final approval on your home loan.

» MORE: Buying a Fixer Upper? Here's How to Apply for an FHA Rehab Loan

Signs of foundation issues

While the average home buyer isn't qualified to evaluate foundation issues, you should keep an eye out for the tell-tale signs of structural damage as you conduct your house search:

  • Floors that are sagging or uneven
  • Doors and windows that won't close properly
  • Cracks in walls — especially over doorways and windows
  • Large cracks in concrete floors
  • Basement walls that are bowing or have horizontal cracks
  • Mold or excessive moisture in basement or crawl space

In isolation, a single one of these characteristics might not necessarily reveal underlying foundation damage. But if you identify multiple traits at a single house, it's a good indication you should have an expert perform a more thorough inspection.

Foundations rarely fail overnight. Most frequently, the root causes of structural problems originate during the house's construction. Improper soil preparation, poor design choices, and inferior materials all lay the groundwork for foundation issues that could take years to manifest.

» MORE: How much do foundation repairs cost?

House settling vs. foundation damage

Foundation cracks look scary, but usually they're just the byproduct of a common — and harmless — process known as “settling.”

Settling happens gradually over many years as the house and soil underneath it expand and contract with seasonal changes to temperature and moisture levels.

Cracks that form as a result of settling shouldn't worry you. Most modern foundations accommodate up to 1" of settling, and slab foundations can be designed to handle up to 4" of soil movement. And if you're concerned that they mar a home's appearance, you can fill them in quickly and inexpensively.

But how do you judge whether a foundation crack is the result of ordinary settling or a symptom of something more serious?

According to Walt Keaveny, an engineer and risk management specialist in the home building industry, you can evaluate the severityof foundation cracks based on their size:

  • Negligible: Hairline to 1/8"
  • Moderate: 3/16" to 9/16"
  • Severe: 9/16" to 1"
  • Very Severe: Over 1"

Note that this is just a general guide: you should consult with a structural engineer to determine whether cracks in a specific house foundation are cosmetic blemishes or a genuine concern.

Will a home inspection uncover foundation problems?

Short answer: a home inspector might spot foundation problems, but they aren't required to. If you're concerned about foundation damage, you should pay a structural engineer to perform a thorough evaluation of the home's structural integrity.

Why a general home inspection isn't enough

Home inspectors are generalists. They're trained to identify symptoms of potential problems in common home systems, but they're not experts in any of them.

According to American Society of Home Inspectors (ASHI) guidelines, home inspectors are required to "inspect" and "describe" the foundation. They are "NOT required to provide engineering or architectural services or analysis" or "offer an opinion about the adequacy of structural systems and components."

The good news is that many home inspectors will point out potential structural damage. One survey found that 8.9% of inspection reports included evidence of foundation issues.

Regardless, general inspectors aren't trained to diagnose the underlying problem or recommend repairs. For that, you'll need a structural engineer.

Hiring a structural engineer for a foundation inspection

Most structural engineers charge $100-150 per hour, and the typical cost for a foundation inspection is $300-1,000, per HomeAdvisor.

Actual foundation inspection costs depend on several factors, including:

  • The size of the home
  • The type of foundation

» MORE: Compare quotes from local structural engineers.

What to do after a foundation inspection

The next step after your foundation inspection is to solicit repair estimates from several qualified contractors. Send them the engineer's written report and request bids based on its specific recommendations.

After your contractor completes the foundation repairs, you should pay your structural engineer to review the work and confirm in writing that the contractor performed it to the inspection report's recommendations.

Not only will this help protect you from shoddy workmanship, but as real estate investor J Scott explains in The Book on Estimating Rehab Costs, it will also transfer "some or all of the liability" to the engineer if the repairs fail to solve the underlying foundation issues.

How much do foundation repairs cost?

The average homeowner pays around $4,500 to repair foundation issues, according to data from HomeAdvisor. However, costs vary dramatically based on the severity of the damage and the precise nature of the repair.

Here are common symptoms of foundation damage and what you can expect to pay to fix the underlying issue:

Foundation SymptomPossible CausePotential Solution(s)Typical Repair Costs
Vertical Cracks
  • Ordinary settlement
  • Fill cracks
  • Seal foundation
$250-800
Horizontal Cracks
  • Poor drainage
  • Soil pressure
  • Fill & seal cracks
  • Reinforce walls
Up to $4,000
Leak/Excessive Moisture
  • Poor drainage
  • Cracks
  • Fill cracks
  • Seal foundation
  • Install sump pump
$2,000-10,000
Bowing wall
  • Poor drainage
  • Soil pressure
  • Fix drainage issues
  • Reinforce walls
  • Install piers or wall anchors
$1,000-15,000
Shifting/Sinking
  • Uneven load distribution
  • Mudjacking
  • Install piers
  • Reinforce walls
$1,000-15,000
Crumbling/Erosion
  • Poor drainage
  • Improper soil preparation
  • Fix drainage issues
  • Seal foundation
  • Reinforce walls
  • Install piers
$1,000-15,000

Sources: HomeAdvisor, HomeGuide, Fixr

And here are the repairs a structural engineer might recommend for common foundation problems, along with their costs:

Foundation RepairTypical Repair Costs
Basement Underpinning/Piering (8-10 piers)$5,600-30,000
Sealing$2,000-7,000
Foundation Jacking/Leveling$500-1,300
Foundation Stabilization (12 strips)$4,000-12,000

Sources: HomeAdvisor, HomeGuide, Fixr

» MORE: Get foundation repair quotes from local trusted contractors

Tips for buying a home with foundation issues

Include an inspection contingency in your offer

If you make an offer on a home you suspect has foundation issues, you should be careful to include an inspection contingency.

The inspection contingency will allow you to void the purchase contract within a specified period if an inspection reveals problems the seller didn't disclose (and probably didn't even know about) upfront.

Negotiate for concessions

Unless the seller disclosed the foundation damage and factored it into the home's list price, it's common to renegotiate after uncovering hidden problems.

Here are four common concessions you can ask your seller to make:

Ask the seller to...Key BenefitKey Drawback(s)
Make repairs before closing
  • Shouldn't impact financing options
  • Seller is incentivized to choose the cheapest repair option — not the best long-term fix
  • May impact closing timeline
Reduce the house price
  • Shouldn't impact closing timeline
  • Lender might not underwrite home, even with reduced price
  • You must still find a way to pay for the repairs
Pay your closing costs
  • You save money up front
  • Credit is limited to the size of your closing costs
  • Lender may require major repairs to be completed prior to closing
Give you a repair credit at closing
  • Seller "pays" for repair, but you get to choose the contractor
  • Your lender may limit size of seller credits

There's no one-size-fits-all strategy for renegotiating a home purchase agreement. It hinges on your and the seller's priorities, the seller's willingness to negotiate, and other factors such as how long the house has been on the market and how quickly local homes are selling.

How foundation problems impact your homeowners insurance

Your lender won't allow you to close on your mortgage without a homeowners insurance policy in place. Luckily, you shouldn't have too much difficulty insuring your property.

Insurance companies will often underwrite a homeowners policy on a distressed property as long as the buyer agrees to complete the repairs within a specified timeframe — usually around 30 days.

And even in extreme cases — such as when the property will be vacant during extensive repairs or the renovation costs exceed the current value of the house — you still have multiple options.

These so-called "fixer-upper" policies cover fewer risks than conventional homeowners insurance, so you should re-apply for traditional coverage once the repairs are complete.

Homeowners Insurance TypeKey Feature(s)Best for...
HO-8
  • Insures older homes and other houses whose replacement cost exceeds actual cash value (ACV).
  • Renovation projects at occupied houses
Vacant Dwelling
  • Insures vacant homes against vandalism, but not theft
  • Shorter renovation projects at vacant homes
Builder's Risk
  • Insures vacant homes against vandalism and theft
  • Price may increase throughout renovations as house becomes more valuable
  • Longer renovation projects at vacant properties

Note: Home insurance policies usually only cover foundation repairs when the damage occurs as a result of a covered risk, such as a fire or sudden plumbing leak. So don't buy a home with minor-to-moderate foundation issues and expect your insurance to pay for the repairs later if the damage grows more severe.

» MORE: Understanding the Different Types of Homeowners Insurance