Home Selling in Austin>Question Details

LonghornGal, Real Estate Pro in Dallas, TX

The foundation company wants to buy me out of the "lifetime" warranty on their work. How much does the lack of a warranty affect sales?

Asked by LonghornGal, Dallas, TX Fri Feb 15, 2013

price? I have a house that is currently having the foundation repaired. The foundation company wants to buy me out of the "lifetime" warranty that came with the home when I purchased it. How much does not having a warranty on the repair affect my future selling price? The property is a rental duplex worth about 160000 per comps. The foundation is fixed and while not perfectly level, is on par with other homes in the neighborhood.

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A good rule of thumb for the price change of residential properties in Austin is about 2%-3%/year. At a current value of $160,000, you can do the math. Maybe ask the foundation company to purchase the warranty for an arbitrary fraction of the projected price increase over the time period in which you intend to hold on to the property.

Example: at 2.5% price appreciation/year, you can expect your duplex to appreciate by about $21,000 in 5 years. Factor in 7% frictional costs in sales and that leaves you with an additional $19,500 in your pocket (not counting taxes). If the duplex needs a new foundation at that time, you can expect to deduct the sales price by an equivalent amount of the repair.

What is that risk worth to you? Put a value on it and ask the foundation company to pay you for it. Of course, if the foundation company is not in business in 5 years, all this is moot anyway. I don't need names, but who did you hire? The cheapest guy or a company with a track record of excellence and sustainability? I learned years ago that you get what you pay for.

Good luck, ma'am.

Doug Vogelsass
Agents For Change Real Estate
1 vote Thank Flag Link Fri Feb 15, 2013
How not having a warranty on the foundation repair will affect your future selling price will depend on the condition of the foundation at the time of selling. And also how savvy the buyer is about foundation issues. Let me explain what I mean.

This area of the country has been in a sustained drought and that is projected to continue. That has caused a lot of settling around the outside perimeter of foundations as the ground dries out. The ground further away from the edge dries slower and that 's why you get the differential movement and settling of the foundations. However, movement can also be compounded by the type of soil under the foundation. Some areas have highly expansive clay that will move up and down a lot with moisture changes and cause movement in the structure.

You should have an independent engineer evaluate the type of repair. You will need to know if the foundation company just propped up the settled portions or if they actually put in supports to bearing so that movement will be minimized. There are temporary repairs and permanent ones that cost more. If the repairs done or temporary type, then keep the warranty. You may also consider spending the money to have it fixed right if it's not. An experienced structural engineer can tell you that.

Typically a seller will either need to have the foundation repaired or deduct the cost to do so from the selling price.

I have had a lot of experience with these issues. My degree is in Architecture Engineering from U.T Austin. My husband & partner have an Architecture, Engineering firm as well as a Real Estate Brokerage.

I will be interested to know what you decide.

Best Regards,

Claire McIntyre, Architect / Real Estate Broker / Builder
512 699 9912
MMI McIntyre Associates
Real Estate Brokerage
http://www.mmirealestate.com
claire@mmirealestate.com
McIntyre & McIntyre Inc
Architecture / Engineering
Project Management
http://www.mmibuildings.com
0 votes Thank Flag Link Sun Feb 17, 2013
This seems very odd. It's almost like they know something is wrong if they want to get out of the warranty. I would strongly suggest getting some other opinions on your foundation.
0 votes Thank Flag Link Fri Feb 15, 2013
Hmm. Without knowing the specifics, it's hard to say. How long ago did you purchase the duplex? What is the current foundation condition? Is there a noticeable change in condition?

My thought is if the foundation company wants to buy you out of the "lifetime" warranty, they know it will cost more to fix the foundation in the future than their buy-out offer. A "lifetime" warranty is extremely valuable in terms of future resale value IF the foundation company is reputable and still in business when you sell.

It's hard to put a number on warranty value. I suggest you contact a structural engineer (not associated with company/existing warranty.) Based on engineer's opinion, have another foundation companiy bid required work and see if (other) company will provide warranty..

Don't give up your warranty without professional consultation!
0 votes Thank Flag Link Fri Feb 15, 2013
I've seen it all now.....

If I saw a house with previous foundation issues, I wouldn't buy it if the warranty was 'bought out' by the company doing the work.
0 votes Thank Flag Link Fri Feb 15, 2013
This question is perplexing. So it is currently being repaired AND the same company wants to buy you out of the lifetime warranty?? I am taking this to mean that a) this same company repaired this duplex in the past; b) they are repairing it now and c) they don't want to ever have to do so again.

Honestly, I've never encountered this type of scenario before. Depending on the scope of the current repairs (and I would definitely get another company to evaluate the foundation), I might let them buy me out for a pretty penny and then ABSOLUTELY go with another company for this specific repair (if indeed you need one at this point in time). But the situation you describe just seems shady and weird to me.

Before you do/sign anything with this particular company, I would strongly advise you to get a structural engineer from a well-reputed foundation company to come and evaluate the situation. It would cost you little (and, if you play your cards right, possibly nothing), and it could really save you some headaches and losses down the road. You might also ask the engineer that the company sends out what they think of such a request.

As far as how much not having a warranty will affect sales price: there are so many variables, so this is difficult/impossible to answer without more information. Parts of Austin, for example, are really reputed for foundation issues (i.e. the east side). Many buyers in these areas are usually prepared to put up with a little shifting. BUT if the foundation has shifted significantly, it becomes difficult (if not impossible) for a potential buyer to get a mortgage until it is fixed. This could seriously hinder you on re-sale and will certainly scare away some buyers.

Generally, a life-time warranty certainly reassures buyers and adds value, so it's always better to have one. That said, the lack of one does not (in the Austin market, anyway) necessarily kill the deal and/or mean you have to take a hit. However, it really all depends on the current state of the foundation, the state of the house, and the area you are in.

I notice from your profile that you are from/in Dallas? If the house is in fact in Dallas (and not Austin), then I would definitely ask some local agents there what their experience with selling houses with "imperfect" foundations is. Foundation issues play out differently in different cities and areas.

Good luck with this, and my condolences for having to deal with such a stressful situation.

Karen Pagani, Ph.D., Realtor
The Gill Agency
http://www.austinrealestate411.net
0 votes Thank Flag Link Fri Feb 15, 2013
You have nailed the scenario very well - the only addition is that the latest repairs are complete, so the foundation work has been done. I think what happened is that they are not wanting to have to work on the property in the future. However they have fixed it for now, and added additional piers over and above the initial "repair" plan without charging me. I have also fixed the underlying plumbing problem that triggered the latest repairs to the foundation.

What I need is an idea on what a "pretty penny" is. are you thinking $10K? 5K? 30K?

The home is on the east side in Austin, and basically everything in the neighborhood has had (or needs) foundation work.

The place rents for $2K a month (total) so it's a great cash flow. But as you note, I'm far away and ready to stop being a long distance landlord. So I'm likely to sell in the next few months (once the cosmetic repairs are done)
Flag Fri Feb 15, 2013
So you're having foundation repair and they'll discount their work if they don't have to warranty it? I would run, run fast, get a new company ASAP. Any company that does not warranty thier work would not be a company repairing things for me and not a company I would recommend to any of my clients.
0 votes Thank Flag Link Fri Feb 15, 2013
"They have honored the warranty and made the repairs (first work 2004, then 2007, and then this month). They want to be released from the warranty. I am planning to sell the property but am trying to get an idea of what impact not having a warranty on the foundation would do to the sales price."

It's a tough call. If this repair was done to standards and the warranty was out of date, I do not believe that it would effect the price negatively if the warranty was bought out. It would defiantly have to be listed in the sellers disclosure. If I was representing a buyer I would want a new assessment to ensure that the foundation that is no longer covered is not an issue. If there is an issue and it's not covered you're back to square one. A needed repair will effect the sales price. Foundation issues can happen in the matter of weeks.
Flag Fri Feb 15, 2013
They have honored the warranty and made the repairs (first work 2004, then 2007, and then this month). They want to be released from the warranty. I am planning to sell the property but am trying to get an idea of what impact not having a warranty on the foundation would do to the sales price.
Flag Fri Feb 15, 2013
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