Buying a Home with Property Damage: What You Need to Consider Before Closing

Making the decision to buy a home is a major investment that should not be made lightly. Property damage is a factor that can only complicate the process further. While some issues are minor and easily fixable, others can lead to significant financial burdens. That’s why performing your due diligence by working with inspectors, real estate agents, and attorneys is crucial. These professionals will also be able to offer insight into factors such as the levels of minimum amount of liability insurance you need.

Learn how to keep an eye on the important things, such as assessing damage to a home you are considering purchasing, negotiating repairs, and securing financing so that you get the best deal possible. 

The Types of Property Damage to Watch For

First and foremost, when looking to close on a new home, you need to actually know what type of property damage you are looking for. This is not a one-size-fits-all home type of situation either. Below are some of the most common types of property damage that you should try to locate:

• Structural Damage: Foundation cracks, roof issues, or sagging floors can signal that major repairs may be needed. 
• Water Damage: Leaks, mold, and flooding risks can affect the home’s livability and safety, which is a major concern. 
• Pest Damage: Termite infestations or rodent damage may compromise the home’s structure by weakening the foundation. 
• Electrical & Plumbing Issues: Outdated wiring, faulty pipes, and hidden issues can lead to costly fixes over time and should always be handled by a professional. 
• Cosmetic vs. Serious Damage: Learn to differentiate between minor aesthetic issues, such as chipped paint and worn carpets, as opposed to major structural concerns.

The home you are considering purchasing may have some or all of the above issues present. If you notice any, consider hiring a professional to evaluate the state of the issues to see if it should have an impact on the property value. 

Getting a Professional Home Inspection

One efficient way to reduce the likelihood of being surprised by property damage on your new home is to simply hire a home inspector. Certified home inspectors can assess key areas, including the roof and foundation, HVAC and plumbing systems, mold and water intrusions, electrical and fire hazards, and more. They will also generate a home inspection report at the end, which outlines what red flags popped up that you should consider taking seriously. 

Specialists don’t always need to necessarily be brought in, but if the home you are considering purchasing is on the older side or if you have serious concerns about one area, it may be worth it. These specialists could be structural engineers, electricians, mold remediation experts, pest control assessors, and others.

How to Negotiate Repairs and Seller Concessions

In the event you actually do find property damage on the home you are trying to purchase, you should always immediately sync up with the seller of the home. You should ask them to make the repairs before the closing of the home continues, but be aware they may refuse and simply state that the issues had been there when you originally agreed. In this case, you should negotiate a price reduction or ask for a seller credit so that you can put funds toward the repairs. If the damage is too severe, never be afraid to walk away from the deal. 

When writing a repair request, you should naturally prioritize major repairs over cosmetic fixes, as these will cost the most. If possible, provide estimates you received from the professionals, as it will serve as a form of justification for the request. You should also try to make an effort to understand “as-is” sales and the protection you have as a buyer. For perspective, if you agreed to buy a home under an “as-is” contract, you are agreeing that the seller will not make repairs or modifications before the transfer of ownership. 

Securing Financing and Insurance for a Damaged Home

Be aware that securing financing when there are major repair items to be done on a home can be a challenge. Lenders may require that certain major repairs be completed before they are comfortable issuing you a loan. If money is an issue, consider options such as an FHA 203(k) renovation loan, which can provide you with assistance if the home needs serious work. It’s worth mentioning that the home will need to be at least a year old. Lenders may also allow you to actually set some funds aside for repairs after closing through escrow holdbacks, which is a unique way to get around the above issue. 

On top of issues with financing, you may soon see that some homeowners insurance companies deny coverage for homes that have existing damage. You should shop around to get multiple insurance quotes to also ensure that you aren’t being upcharged just because a few items need to be taken care of at some point on the home. There may be certain exclusions in the contract, though, as a result of those repairs, which is something to be aware of. 

Make an Informed Decision When Purchasing Your Next Home

Whenever you are buying a home, regardless of whether they just finished building it or if it’s been standing for multiple generations, you always need to do due diligence. Look for the signs that indicate there may be property damage on the home and try to assess its scope yourself. If you cannot, then reach out to specialists who can tell you what the true scope looks like and whether or not it should have an impact on the value of the home. You should always walk away if the risks of purchasing the home outweigh the benefits, especially if you are having trouble securing financing as a result. If you believe you have purchased a home and there is a misrepresentation of the amount of work and damage, don’t hesitate to reach out to a lawyer who can assist you with your case. 

For more information on home purchases and making the most of your investment, check out GatorRated.com.