Hello BeachBroker and fellow Encinitas neighbor. I have to applaud and give a thumbs up to Steve on his remark: I think the only time it is appropriate to have water running under your home is when you live on a Yacht!
Albeit very humorous it is very true and a very important issue.
As a general contractor distressed property rehab specialist for the past 3 decades we've done hundreds of drainage projects all over the SoCal area. Additionally I've been a "cross lot drainage "Expert Witness" on dozens of drainage issues and am currently involved with a multi million dollar class action litigation on this very subject.
I can tell you first hand that water in, around or under a dwelling is trouble and a one way ticket to a very costly law suit let alone repair bill. By law your neighbor is not allowed to let water drain from his lot to any adjoining private or public property.
Drainage be it surface runoff or subsurface percolation should always be caught and diverted to a storm drain system; usually the street gutter, whereby it will flow to the major storm drain system. This sometimes if not always requires a two fold approach.
The first is to install a French drain system around the entire perimeter of the structure. A French drain is a subterrainean drain comprised of trenching, installing a gravel envelope around a filter cloth thereby allowing water to filter through it and into a perforated drain pipe installed on at least a 1% slope, aka fall line) which leads to the storm drain system or a sump well and pump system.
The second type of drain (usually run in the same trench as the French drain if not tied into it) is a surface drain system whereby a soils and/or civil engineer locate the low spots and install a catch basin with drain pipe leading to the trench and escorting the water to the storm drain system or to the sump well where it is pumped into the main storm drain system which is usually the street gutter.
I must also give Cory a thumbs up for her astute observation regarding potential structural ramifications to the home. It's not uncommon, especially in San Diego's predominantly very expansive clay soil environment to realize mild to severe movement as the clay expands and contracts over the years.
This perpetual motion causes a structure to settle and shift resulting in cracked founations, seepage to the interior of the structure if it's a slab on grade or into the crawl space where it sits and collects for years on end resulting in mold issues as was addressed by Frank.
All in all it is definitely not normal nor is it acceptable and should be addressed and corrected ASAP. Given home is in San Diego and we are still actively involved in this trade skill I would be more than happy to have my son, Chad Arendsen, principal of "Chad of All Trades" http://www.chadofalltrades.com
give you an assessment and cost to repair this problem for either your seller or buyer.
However, be advised that a properly designed and installed drain system is still not a cure all to the problem. A drainage issue is a drainage issue because water inherently seeks its lowest level and unfortunately that can end up at the doorstep of someone's home.
The only remedy is to catch and divert the water but it's still going to be an ongoing issue which will have to be periodically monitored and maintained as the drain pipe can clog up with soil and roots and the sump pump system, if needed, needs to be periodically inspected and maintained.
Should you have any other questions or concerns please feel free to contact me at 760 815-6977, firstname.lastname@example.org or log onto our website at http://email@example.com.