Most home loan lenders are taking a different outlook these days on the property quality itself, future property values and expectations, and the sellers/buyers motivations with respect to the non-disclosure of material facts concerning home drainage during the sale of a home.
As a result I see lenders in my market writing a different play book for financing homes with home drainage problems.
Most lenders are not going to finance a drainage problem anymore unless the hand excavated french drains are installed before closing of escrow rather than a band aid approach to groundwater problems.
A sump pump won’t stop groundwater from entering below grade areas like crawl spaces and basements even if they are mounted on the outside near the foundation wall. Especially if they are located within 10 feet of your foundation.
A sump pump installation is almost always the sellers quick fix way out during a home transaction without having to spend the money to do it right and collect the groundwater prior to it saturating the foundation area.
It is the buyers greed many times, evidenced by their desire to take a few thousand off the purchase price and buy into the idea that installing a sump pump will change anything at all, that will be their own undoing in time with respect to unsolved home drainage problems.
Lenders in the past were passive on the subject of requiring sellers or buyers to fix home drainage problems prior to closing of escrow and financing the home as they previously could package and sell the paper generated from creating notes against real property as easy as could be. They had no liability. If the buyers defaulted it did affect them one bit.
Currently around the United States alone thousands of home drainage affected homes are sitting off the market all together because the lender is just like the seller who will not do the correct repair and step up. They do the same thing. Those lenders say they have no cash to solve the home drainage problems either. Right! Now the federal government has agreed to take those toxic assets off the books of the banks and bail them out, some of which are homes with drainage problems preventing the financing of the home. Isn’t that special. Well guess what, those same properties will likely continue to sit there and devalue some more tearing down the overall market recovery even when the feds get them.
Most lenders have decided that they must take a more pro-active approach to letting sellers get away with selling a home drainage pig these days and are not allowing buyers to buy a home in that condition when the buyers just want the home emotionally and really do not see the home drainage problem as more than a gateway for them to work the sellers for a few thousand off the purchase price at closing.
The buyers do not really become the fall guy in this example, the lenders do. Formerly, upon sellers and buyers agreement per addendum on the earnest money agreement, the buyers would just take the property “as is” subject to the buyers acceptance of whatever would be agreed to be done to solve the problem, if anything at all, and the buyers would take the property with its home drainage issues not dealt with a pocket some cash off their underlying home mortgage balance. The discussion ended for everyone at the point of the calculation of money off the purchase price. Out of site, of out mind.
The buyers have pocketed the cash. Most of those buyers when turned into sellers will contend there never was a home drainage problem ever, and when it is discovered again, only worst with additions, they absolutely swear that they knew nothing about it as they attempt to pass on the problem to perhaps some young first time home buyer couple..
Until one day these current fall guy home owners find out that the new drainage bid is umpteen thousand and includes post-beam-pad replacement, foundation masonry work, major dry rot repair in floors, etc. Those are the sellers that will lose their shirts and bail out giving the home back to the bank and signing a deed in lieu of foreclosure if the lender will let them. When it gets that bad and the lender is burned, they will dump it with the problem this intact.
Most often in the past, many home buyers would look at some money off the purchase price as a down payment rebate of sorts. As a result absolutely nothing was likely installed to prevent the groundwater problem from happening. Time made the groundwater problems compound into other problems as well. Hand excavated french drains were not installed in this scenario as the lenders would not demand it, even though they would demand that a home seller fix a dry rot repair that was caused by the lack of proper home drainage systems installed. The system was ripe for change.
Time after time this saga has continued in many cases, resurrecting the same old plot of doing nothing and accepting home drainage problems designed for failure and getting some artificial reduction in some arbitrary home price for doing nothing. Real smart folks. As an example, I have been to the same home in a suburb of Portland, Oregon many times 2-3 years apart and watched homeowner after homeowner get stuck holding the bag out of their own bad judgement, while no one had the cash to solve the home drainage problem and the bids go up by thousands each time I look at the home damage and repair requirements.
Most homeowners survive and borrow there way out under crisis so the repairs can be completed and the home escrow closed, but not in a timely way and not without lots of changes.
When the dry rot repairs and the structural damage finally add up to big 5 to 6 figure bucks and that knowledge finally kills a future sale transaction on the home dead in its tracks without a large monetary outlay on the part of a seller, most often everything starts to add up for the sellers both literally and figuratively. The buyers usually walk away from this type of home when it gets that bad if a seller cannot present a home that qualifies for financing, cannot make the payments or does not want to, the game is over.
The buyers get their earnest money back when the earnest money agreement is properly constructed even if discovered after signing the earnest money agreement. The clause in most earnest money agreements that protects the buyers in this case says, ” this transaction subject to the purchaser and property qualifying for acceptable financing”. If there is no satisfactory resolution to the home drainage problem, the buyers gets theirearnest money back and the sale fails.
Home builders are some of the worst slip sliders on the installation of effective home drainage with hand excavated french drains and simply doing it right. I have come behind too many stupid builder tricks to not take a shot at their abilities with respect to home drainage.
Home builders contribute to the home drainage problem most often not because they do not know better, but because they want to save the dough times maybe 20 homes for example. That adds up to thousands of dollars per home to install hand excavated french drains for the entire subdivision properly and vent the downspouts correctly, as well as subordinate other interests of the site and home development to the necessity for home drainage health. Home builders often drop the ball on engineering slopes, compaction, and hand excavated french drain grade installation for quality home drainage results.
Many homeowners are in harms way right now seriously dealing with short re-financing time frames, pending foreclosures, new acquisitions that must by closed in a timely manner, and many homeowners and buyers are lined out with road maps for due diligence on where they need to go and how they need to survive the day with respect to keeping their home in a condition that will allow them to sell it quickly and getting a new home loan closed in a timely fashion.
If you have home drainage problems and are looking for a smooth home escrow closing you can throw the time table and projected closing dates right out of the window because everything will change. Home drainage problems, usually groundwater in the crawl space or basement, kills more deals than survive, that is for sure.
My advice to any homeowner with home drainage problems or home buyers wanting to purchase one, is don’t get caught in that squeeze. Read additional articles on this site about the buyers due diligence checklists for home drainage when buying a home and having professional home drainage contractors install hand excavated french drains on new construction as well as existing homes with home drainage problems.
Read about closing of escrow with drainage problems and other lessons on the prevention of home drainage problems as well as how to save the farm when everything looks like it is going really bad.
You will get out of this study course on home drainage exactly what you put in with respect to your interest level and ability to read and comprehend the material. If you are even moderately interested and have a particular need for the information, you will find lots of comfort and common sense that in the present and future you may use to assess the abilities of those around you who say they can get the home drainage job done right, as well as learn how to do it yourself with some help most likely.
Stop the groundwater from entering your crawl space or basement with hand excavated french drains.