Hello, my wife and I found this great property with a very nice home, however there is unprepared sinkhole damage. We have copies of the damage and what needs to be done to fix it. My question is how would we go about actually purchasing the property, we have some cash but not enough to buy it outright? Do we have options?
The first thing to evaluate was whether this was an actual confirmed sinkhole or just a sinkhole claim. Many people outright assume that just because a sinkhole claim was made and investigated that it is a sinkhole house. You want to take a look at the engineering reports from the insurance company and first see if they actually did find sinkhole activity. If they did not, then maybe the homeowners just settled for a little money and decided to move. If there is not confirmed sinkhole activity then you may not have to do any significant repairs, may not have as much trouble finding insurance and may not have trouble getting a loan.
Now if sinkhole activity was found the engineering report will have a recommended repair plan. You may or may not have to follow that plan exactly. This is something you want to speak to your lender about before you do anything. I would show the report to the lender and ask whether they will provide a loan for this house at all. Many, of not all, lenders will refuse to provide a loan for an un-repaired sinkhole home and most, if not all, insurance companies will refuse to provide coverage for an un-repaired sinkhole home. If you don’t have enough cash and you can’t get a loan, then just walk away as you are obviously wasting your time. If your lender will write the loan without repairs then consider yourself lucky. But, if you have a loan, you have to have insurance and I am only aware of one carrier who will insure an un-repaired sinkhole home and that is Loyds of London. If you get Loyds to write the policy, consider yourself lucky again, and also consider yourself paying an arm and a leg for coverage. This insurance will typically be three to four times more than regular coverage. You would be strongly advised to ensure that you can get coverage before you buy the house.
Last thing you want to do after you confirm that you can get a loan and insurance at all is figure out what the repair costs are. Again, speak to your lender and confirm with them whether they will require you to do certain repairs or not. My guess is you will have to repair something. See if they will accept just underpinning the home or just repairing the cosmetic damages. Again, you want to ask all these questions before you buy or you may be seriously stuck in a bad position. Finally, remember to take the repair numbers into consideration when buying. This home should be at market value minus the repair costs and maybe even minus a little more for the stigma of a sinkhole home. Speak to some foundation repair companies and see what they would charge to do the repairs and then factor those into your offer. You can get a good deal on these homes and they can turn out to be great investments but you have to be extremely careful and thorough before you even consider making an offer.