Selling a house with foundation problems isn’t easy. It gets even trickier when a buyer discovers them during an inspection.
Your best bet is to find and fix the damage before you put your home on the market. Your house will be easier to sell, and you'll likely get a better price — one that could more than cover the repair costs.
If that's not an option, either because you're unwilling or unable to pay for the foundation repairs, you'll most likely have to disclose the damage. This could complicate negotiations with buyers, making it harder to sell quickly and for an attractive price.
The good news is that foundation issues are often less expensive to repair than you might think. In fact, you may be able to fix some minor problems yourself. There are also financing options that can help cover or defray the out-of-pocket costs.
In this article, we'll outline everything you need to know about selling a house with foundation problems — including how to identify potential issues, typical repair costs and financing options, and when it makes sense to sell "as is."
JUMP TO SECTION
- Why foundation problems make it harder to sell your house
- Do I have to disclose foundation issues?
- Should I fix foundation issues or sell my house as-is?
- Home foundation issues and average repair costs
- Foundation problems you can fix yourself
- Does homeowners insurance cover foundation repairs?
- How to pay for foundation repairs
- What if the buyer's home inspection reveals foundation problems?
Why foundation problems make it harder to sell your house
Fixing foundation issues can be a major headache, but so is trying to sell a house with unrepaired structural damage.
More than half of all home buyers consider foundation problems a "deal breaker." By not addressing damage before listing, you run the risk of your house languishing on the market for far too long or selling for a far lower price than you hoped.
Buyers who aren't scared away may face challenges obtaining a mortgage, depending on the scope of the issue. Most lenders won't underwrite conventional loans on homes with major structural defects. Buyers may be able to get a rehabilitation loan, but the process requires more time and effort than most will be willing to give.
Do I have to disclose foundation issues?
In most states, home sellers are legally required to disclose foundation defects — along with other information about the property — on a standardized disclosure form.
Even if it’s not required, it's almost always a good idea. According to a report from Zillow, more than 80% of buyers hire a home inspector, so there's a solid chance they'll uncover evidence of the problems anyway.
The handful of states that don't require sellers to make comprehensive disclosures about their houses are called "Caveat Emptor" or "buyer beware" jurisdictions. The following states generally follow Caveat Emptor principles:
- North Dakota
- West Virginia
However, you may be subject to local regulations even if you're selling in a Caveat Emptor state, so you should consult with your real estate agent to determine what disclosures you're required to make.
What about past damage I've already repaired?
Depending on your state’s specific disclosure requirements, you may or may not have to disclose past foundation repairs. But as long as you had a qualified professional complete the work, past foundation repairs are advantageous — not something you want to hide from prospective buyers.
Quality foundation repairs should last for the lifetime of the house, and many repair companies offer lifetime warranties that are transferable to future owners.
If you're concerned past foundation work will make buyers nervous, hire a structural engineer to inspect the foundation before you list, then make the inspection report available to buyers.
Should I fix foundation issues or sell my house as-is?
|Fixing the foundation issues yourself is a good idea if...
|Consider selling your house as-is if...
If possible, it's better to address foundation issues before listing your house. As-is listings essentially advertise that a home has problems the seller doesn't want to fix, which scares most ordinary home buyers away.
As-is sales do attract one type of buyer — investors — but they're going to pay a lot less than market value for distressed properties.
At the very least, you should pay for a foundation inspection, so you can find out how much the problem costs to fix before you decide to sell your house as-is.
What to know about selling your house as-is
When you sell a home as-is, you're telling buyers up front that they're going to have to accept the property in its current condition — you're not going to repair anything.
Although most sellers come out ahead if they address repairs themselves, there are situations where it makes sense to sell as-is.
Most often, people sell as-is because they can't afford to make the repairs, need to sell quickly (and can't risk an uncertain construction timeline), or worry the repairs won't add enough value to justify the time and money.
If you decide to pursue an as-is sale, you have two options:
- List your house as-is. This looks a lot like a traditional home sale. You can work with a real estate agent who will advertise your home and communicate with buyers' agents on your behalf.
- Sell directly to a "we buy houses for cash" company." These sales are usually fast — most close in just seven to 30 days — but may net you a lower price than listing the house on the market.
Either way, you should expect the final sale price to be well below market value. Many investors adhere to the "70% rule": they generally won't pay more than 70% of a house's after repair value (ARV) — minus the cost of repairs.
Do I have to make foundation repairs before I list my home for sale?
No, you can list your house for sale in whatever condition you want. However, your best chance to maximize your home's sale price is when it first hits the market. If you expect to make repairs, you should aim to complete them before you list.
Besides, since you'll most likely have to disclose the problem to buyers anyway, you'll put yourself in a better negotiating position if you can document that the damage has already been fixed.
That said, you might decide to delay the repairs if:
- You can't pay for the repairs until after the sale. If you're unable to pay for the repairs before listing but you have plenty of equity, you can disclose the damage up front and offer buyers a repair credit at closing.
- You're selling in a hot real estate market. If your local market has lots of buyers but few homes for sale, buyers may be willing to buy a house that needs repairs.
- You're selling in a Caveat Emptor state. If you're selling in a Caveat Emptor or "buyer beware" state, you may decide to list your house first and wait to see if the buyer discovers the foundation issues during the inspection period. However, this is risky — inspection "surprises" are one of the top reasons buyers back out of contracts.
Should I fix foundation cracks that are just cosmetic?
You don't have to fix foundation cracks that are just cosmetic, but it's usually prudent to repair them if you think a buyer will discover them during a home tour.
The average buyer won't know the damage is just cosmetic. Although a foundation inspection would prove the cracks aren't serious, many buyers will write your house off immediately instead of paying a structural engineer to take a closer look.
Sealing foundation cracks rarely costs more than a couple of hundred dollars. And if you're reasonably handy, you can likely complete this repair yourself.
How to pay for foundation repairs
The typical homeowner pays around $4,500 to fix common foundation issues, although repair costs vary tremendously based on the severity of the damage and the nature of the repair. You'll also need to budget for a foundation inspection, which could cost $300-1,000, depending on the size of your house.
Don't worry if you don't have enough savings to pay for the repairs out of pocket. While homeowners insurance probably won't cover the damage, most people can get financing. And you might be able to defray the total cost by fixing minor problems yourself.
Home foundation issues and average repair costs
Here are common signs of foundation issues and what you should expect to pay to fix the underlying problems:
And here are the repairs a structural engineer might recommend for common foundation problems, along with their typical costs:
Foundation problems you can fix yourself
While most foundation repairs require a qualified professional, there are several smaller problems handy homeowners can tackle themselves.
|Symptom||Potential Foundation Repair(s)||Can I Fix It Myself? (Experience Level)|
|Exterior hairline cracks||
|Moisture in crawl space||
|Sagging floor above crawl space||
Unless you're just sealing hairline cracks, you should hire a structural engineer to inspect the foundation before attempting to fix any of the damage yourself.
Never attempt serious repairs yourself unless you're qualified. It's a safety issue, and for major projects, you'll have a much easier time convincing buyers the repairs are sufficient if you hire a professional.
Does homeowners insurance cover foundation repairs?
Probably not — homeowners insurance policies will usually only pay for foundation repairs if the damage is the byproduct of another covered risk. Most structural problems occur slowly over time, and insurance rarely covers damage caused by neglect.
For example, homeowners insurance will likely cover the repairs if a pipe bursts suddenly, flooding your crawl space and causing mold growth. However, insurance won't pay to fix your foundation if the same pipe had a slight leak that encouraged mold formation over a period of years.
If you want to be certain, call up your insurance agent and ask. It will probably be difficult to find out just by reading your homeowners insurance policy.
How to pay for foundation repairs
Homeowners can pick from a wide array of financing options for foundation repairs. What's best for you will depend on factors like your anticipated repair costs, credit score, sale timeline, and tolerance for revolving credit.
|Financing Option||Key Benefit(s)||Key Drawback(s)||Best for...|
|Home improvement/personal loan||
|Home Equity loan*
Home equity line of credit (HELOC)**
|Finance through repair company||
|FHA Title I Property Improvement Loan||
|USDA Section 504 Home Repair Loan||
Don’t be dissuaded from financing the repairs just because you have poor credit. On the one hand, a lower credit score can increase the interest rate you pay as much as four times over. On the other, a high interest rate loan might still be worth it if your home sells quickly — just make sure to pay it off immediately after the sale.
And since you're planning to pay the funds back quickly, you should also be careful to avoid loans that have prepayment or early termination penalties. That's especially true if you take out a home equity loan or line of credit (HELOC); these loans are tied to your ownership of the house, so you have to pay them back as soon as you sell the home.
What if the buyer's home inspection reveals foundation problems?
It's always preferable to find and fix foundation problems before you put your house on the market, but if a buyer discovers damage during a home inspection, you may still be able to salvage the sale.
The first thing the buyer will do is decide whether to hire a structural engineer to conduct a comprehensive foundation inspection or void the contract. If they hire an engineer, it shows they're still very interested in purchasing your house. However, you should be prepared to renegotiate based on the report's findings.
Negotiating seller concessions on a house with a bad foundation
Following the foundation inspection, the buyer will submit a revised offer based on the structural engineer's recommendations. They'll likely start by asking you to make every recommended repair before closing, but repairs aren't the only thing you can offer to buyers to re-seal the deal.
Here are four common concessions you can make to compensate buyers for undisclosed damage, along with their advantages and drawbacks:
|Agree to...||Key Advantage||Key Drawback(s)|
|Make repairs before closing||
|Lower the sale price||
|Pay the buyer's closing costs||
|Give the buyer a repair credit at closing||
You're under no obligation to agree to any concession, but you'll likely have to give the buyer something if the damage is severe and if they didn't know about it when they initially signed the contract.
When negotiating concessions, you should attempt to assess your leverage honestly. That includes analyzing the situation from the buyer's perspective. Here are some questions you should discuss with your agent as you evaluate counter offers.
- How much will the repairs cost?
- Will the buyer lose financing if you don't make the repairs?
- What does the buyer's moving timeline look like? What about yours?
- How long has your home been on the market?
- Are there similar local houses in better condition, or is inventory tight?
- What is your risk tolerance?
- What would you do to address the damage if the sale falls through?
Unless the buyer is being unreasonable, try to be flexible. Seeing a home go "back on the market" is a red flag to buyers' agents, and it's unlikely that you'll find a buyer willing to pay market value for your home in its present state.
On the other hand, remember that you're not the only one with something to lose. The buyer clearly pictures themself living in your house. And by this stage in the process, they've probably invested close to $1,000 on it between their two inspections alone.
Can the buyer back out of the sale?
If you and the buyer fail to reach a new agreement, they may void the contract. Buyers are generally allowed to back out of real estate transactions as long as the contract has an inspection contingency and they void the agreement during the formal inspection period.
In the rare case that the contract doesn't include an inspection contingency or the buyer backs out after the inspection period is over, they may forfeit any earnest money they deposited when you signed the contract. However, outside of a lengthy and expensive lawsuit, you have little recourse to force them to complete the sale.