Complete Guide to Selling a House With Structural Problems

Selling a house with structural problems isn't easy. After all, you're not just dealing with a bad paint job or some warped hardwood. Your problem is the very foundation on which the home is built, the feature responsible for supporting the structural integrity of the house. Whether the problem is a few minor cracks or a completely compromised structure, it is possible to sell the home. But you have some important decisions to make. 

Is It Safe to Live in a House With Foundation Problems? 

Depending on the severity of the problem, it's usually safe to live in a home with structural problems. Most often, the problem is isolated to one area or limited to a few cracks or swells. A majority of foundation issues are caused by water penetration. Moisture causes soil to shrink or expand, and this can cause the foundation to shift. Floors may crack or warp as a result. Often, the issue is cosmetic but not dangerous. 

There are instances, though, in which severe foundational compromise can make the home unlivable. In 2005, for example, record rainfall pounded a number of hillside homes in Phillips Ranch, California (a suburb of Pomona). Severe mudslides caused the foundations to crumble and slide along the downward slope. Ultimately, eight homes were destroyed and/or condemned. 

The Pomona incident is an extreme and rare example, but even if your structural damage isn't so severe, it can still destroy your property value and alienate potential buyers. That's why you need to be smart about selling your home. 

How Much Does It Cost to Fix a House Foundation? 

One of the most obvious solutions to selling a home with structural problems is to fix the foundation before listing the house. Depending on the extent of the damage, though, this can be a costly solution, and it's not always possible to pay for the work out of pocket. 

If the damage is the result of a natural disaster, your homeowners' insurance may cover the cost. In most cases, though, you're on your own. 

The average cost for foundation repair is around $4,000; this is close to what you might expect to pay for moderate foundation cracking. 

If the foundation is sturdy but you have a few noticeable cracks with no underlying damage, you may be able to complete the work for under $500. 

If the structural problems are the result of significant water damage, the maintenance may run you north of $6,000. 

If your home's stability is compromised, it may require new carbon fiber fabrication or steel installation. This can cost more than $10,000 in many cases. 

How to Sell a House With Structural Problems 

If you want to sell a home with structural problems, you have three options: 

• Repair the damage before listing 

• Set up a repair escrow 

• Sell the home as-is 

There are pros and cons to each approach. 

Repair the Damage Before Listing 

As previously noted, the cost of the repairs can vary significantly. The first step is to obtain an estimate so you can see what you're dealing with. It will cost you money out of pocket, but you'll recover it after the sale if your home attracts a higher price tag.

If you're dealing with several thousand dollars' worth of damage, though, it might not be feasible for you to pay for the work up front. And even if you do have the money, you might not want to put yourself deeper in debt in the middle of an already-stressful home sale. You have to do a quick cost-benefit analysis. 

If you can comfortably afford the repairs, it's in your best interest to just take care of the damage before listing the home. By making your home as desirable as possible, you'll attract the greatest number of potential buyers and land the highest possible sale price. 

If you cannot comfortably afford the repairs out of pocket, there's a way you can still pay for them without having to dip into your bank account. You can establish a repair escrow with the buyer. 

Set up a Repair Escrow

If you want to attract highly qualified buyers but you're currently short on cash, a repair escrow will help you to bridge the gap. It works like this: 

• You determine the estimated value of the repairs, let's say $10,000. The true cost is the amount of money required to restore the home to its maximum market value. 

• You set up an escrow account to hold exactly that amount of money once the sale is complete (some repair escrows will be for 1.5 times the estimated cost of the repairs, thus ensuring that the amount is sufficient to cover any unexpected costs that come along). 

• You disclose to the buyer that the $10,000 is coming out of your (the seller's) end of the sale, but that the buyer will be responsible for using the money to complete the repairs after the sale is complete, usually within 60 to 90 days. 

• The home sells. If the final cost is $200,000, the lender releases $190,000 for the sale of the home and places the remaining $10,000 in the repair escrow on behalf of the seller. 

• The seller uses the money to complete the repairs and then confirms completion with you and the lender.

• The escrow is closed and the transaction is complete. 

Technically, you're still paying for the repairs. But rather than paying up front, you're deducting it from the cost of your home sale. This can be much less stressful-and often less risky-than paying up front, and it can attract buyers who would otherwise be turned off by an as-is home sale. 

But this approach has its downsides as well. First, not all lenders will allow this type of escrow. And if your buyer is relying on a government loan like an FHA loan, a repair escrow can come with a long list of complicated requirements and stipulations. 

In addition, your buyer pool will still be smaller than if you made the repairs yourself. Some buyers don't want to deal with the headache of making significant renovations on their new home, so it may take you longer to sell. 

Sell the Home As-Is 

This method is exactly what it sounds like. You forgo the repairs altogether and sell the home for whatever it's currently worth, knowing that you're not going to fetch as high of a price. While this way is less lucrative, it is also the simplest (and fastest) way to sell a house with structural problems.

Most buyers will be turned off if the structural damage is significant, and some banks will deny a loan for a home in substantial disrepair. Still, if you have limited options, or if you need to sell quickly, this is the best option for you.

If traditional buyers aren't biting, your best bet may be to sell to a real estate investor who flips and resells houses. These buyers are not deterred by foundation damage (or any other significant damage, really) because they expect to renovate the home anyway. An example of such a company is Get Fair Home Offers who buy homes for cash in Los Angeles. The typical deals are all-cash, require no remodeling, and close within a week.

No matter how you decide to sell, it's important to note that you must disclose the foundation problems to prospective buyers. Generally, the home inspection will highlight any issues with the foundation, but even if the inspector misses it, you're still required to disclose it. Otherwise, you may face personal liability when the new homeowner finds it. 

How Should You Sell Your Home With Foundation Problems? 

Now that you understand your three main options, the question is: Which is right for you? Only you can make that decision, but here are some basic pointers to consider: 

• Repair the damage yourself if you can afford the up-front cost and are looking to secure the maximum value from your home. 

• Set up a repair escrow if you can't afford to pay for the repairs out of pocket but you still want to attract a large, highly qualified buyer pool. 

• Sell the home as-is if you have been unsuccessful with the other two methods, if you're looking to get out quickly, or if the damage is so severe that prospective buyers are having their loans rejected. 

Structural damage can present significant challenges for selling a home, but you always have options available.