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11/05/2020

What if I just sell my home "AS IS" with a Foundation Problem?

The first thing we need to clarify is "What does it mean to sell a home "AS IS"?  Selling or buying anything from a car to a home in an AS IS condition is that you are agreeing on a price for the current state of the item that you are buying, whether it is in good condition or not.  Buying a house in an AS IS state usually means that the seller is in 1 of 2 positions in regards to the home.

1. There is an issue that needs to be addressed that the current owner does not want to deal with, such as a plumbing issue, remodeling, or a foundation issue.

2. The seller has to move quickly on selling the home and does not have time to go through all of the inspections and repair part of the escrow process.

Now either of these 2 scenarios make for a quicker escrow process and ultimately transfers the possible liabilities to the new buyer.  The quicker process will typically have a higher impact to the purchasing price that is going to be offered by the new buyer.  Buyers are only going to take on possible problems if they know that they are going to get the home at a discounted rate to absorb any of those possible problems.

Now, if you have eliminated yourself from either of the top 2 categories of sellers, then you are at the crossroads of either A. Do I pass on the problem, or B. Do I bite the bullet and get the repairs done.  Let's see the pros and cons of both options.

  1. Do I Pass on the Problem
    1. Passing on the problems will allow for you to not have to address any of the problems.  In the case of a home that has a foundation issue, this can eliminate a ton of your potential buyers.
      1. The potential buyers for a home get dramatically reduced when a home has a foundation issue, because buyers are either scared of having to fix the issues themselves or that they are unable to get lending for the home.  When a home has a foundation issue, banks and lenders will not fund these home purchases.  What that means is that you have just eliminated all the people that would utilize a loan to purchase your home.  This is a massive number of potential buyers.  That is everyone that would need a FHA loan, Veterans loan, or even a Conventional Loan.  All of these have been eliminated from your buyers list.  Not Good.  Moreover, the people that have the cash to purchase these home's know that.  That puts them in the drivers seat on what they want offer you for your home.  What we have seen is that this is around a 30% decrease in the selling price of the home!  With a $500,000 home sale that is $150,000 off of the selling price!  That's definitely not a small number to swallow.
  2. Do I Bite the Bullet and Get the Repairs Done
    1. Getting the repairs done with a home with a foundation issue is a process and will costs some money up front.  A typical start to finish foundation repair project will take approximately 3 months to complete, with 2.5 months of this timeline being absorbed by the permitting and engineering process.  The actual work takes, on average, about 2 weeks to complete.
      1. When you get the repairs completed prior to listing your home for sale, you are back in the driver's seat when it comes to negotiating power of selling your home.  Once a home's foundation has been repaired you can then ask full asking price for the home, and from our experience, get above asking price.  Why, you ask?  Because you have addressed the problem, and you have the documentation and warranty to back you up and you will be able to transfer these to the new buyers.  Banks will lend on a home that has been properly repaired and have a warranty attached.  Your buyer population opens back up to all of the people that are getting the FHA Loans, the Veteran's Loans, and the Conventional Loans.  You have the entire market back of buyers to advertise your home to.  

With an average cost of foundation repair being $20,000 that puts $130,000 of equity back into your home from the 30% discount you were going to have to give up if you decided to take the "AS IS" selling route.  

Want to learn more about the Foundation Repair Process?  You can reach out to us anytime to get all of your questions answered.

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