Why does this come up so much around DFW?
A lot of it is the dirt. Texas’s state soil, Houston Black, sits in the Blackland Prairie, which runs from north of Dallas down to San Antonio. The Texas Water Development Board describes it as clay that shrinks and swells a lot as it dries out and gets wet, and says that shrink and swell is a common limit on building in the metro areas where it shows up.
Not every DFW lot sits on that soil. But it’s the backdrop every time a Texas inspector writes up a foundation, and it’s why “foundation” is a word you’ll hear on a lot of house hunts here.
What the seller has to tell you
On most resale homes, Texas Property Code section 5.008 requires the seller to give you a disclosure notice. It asks the seller to mark known defects in the foundation or slab, any previous structural repairs, and any settling or soil movement.
The notice is due on or before the Effective Date of the contract. If you get it after that, you can terminate for any reason within 7 days of receiving it.
Some sales are exempt, like a new home nobody has lived in and a foreclosure. And a disclosure only covers what the seller knows. Read it, then go find out for yourself.
What the home inspector reports
A TREC-licensed inspector has a set standard for foundations. They have to:
- Give a written opinion on how the foundation is performing.
- Say what type of foundation it is.
- List the visible signs they used to form that opinion. The rule gives examples: doors that bind, are out of square, or won’t latch; framing or trim board separations; sloping floors; cracks in windows, walls, floors or ceilings; and brick or stone that’s rotating, buckling, cracking or deflecting.
Here’s the hard part. The inspector isn’t required to tell you the cause of a problem, predict how anything will perform later, or provide engineering. So you can get a report that says the foundation shows signs of movement and stop there. That’s not the inspector doing a bad job. It’s the limit of the job.
When to bring in an engineer
If the inspection flags the foundation, get an engineer out before your option period ends. That’s your window to walk away for any reason and get your earnest money back. Here’s how the option period works.
In Texas, only a licensed engineer can practice engineering or call themselves an engineer. The state board, the Texas Board of Professional Engineers and Land Surveyors, keeps a free public roster, so you can look the person up.
What to ask for:
- Their opinion on whether the foundation is performing as it should, and why.
- Whether repairs are needed, and what kind.
- A written report you can hand to me and the appraiser.
Then get a repair bid from a contractor, so you’re negotiating with a real number.
What the appraiser looks at
Your loan has its own rules, separate from your inspection.
FHA. HUD’s handbook tells the appraiser to look for readily observable signs of structural problems with the foundation. It counts evidence of continuing settlement as a defective condition. The lender can only approve the house once the defects the appraiser reports are corrected, and if correcting them isn’t feasible, the lender has to turn the house down. When the appraiser sees evidence of possible structural failure, like settlement, a bulging foundation wall, unsupported floor joists, or cracked masonry or foundation walls, an inspection by a qualified person can be required. The point is for the lender to know the foundation and structure will hold up for the life of the loan. More on FHA loans here.
Conventional. Fannie Mae says if the appraiser sees problems that affect the safety, soundness or structural integrity of the house, the appraisal is made subject to repairs, or subject to an inspection by a qualified professional. If there’s abnormal settlement, the lender needs proof it was fixed, or a professional’s report saying there’s no threat of structural damage.
Either way, the appraiser isn’t an inspector. Both HUD and Fannie Mae say the appraiser’s look isn’t exhaustive and doesn’t cover hidden problems. A clean appraisal doesn’t mean the foundation is fine.
What if the house doesn’t meet the loan’s requirements?
If the appraisal or a required repair turns into a problem, the Third Party Financing Addendum has a Property Approval paragraph. If the house doesn’t meet the lender’s requirements, you can terminate up to 3 days before closing with a written statement from the lender and get your earnest money back. The deadlines are strict.
You usually have other choices too:
- The seller fixes it before closing. On FHA and conventional loans, the lender will want proof the work is done.
- A repair escrow. On some FHA loans on existing houses, repairs that can’t be finished before closing can be escrowed. The house still has to be safe and livable at closing, and your own labor can’t count toward the cost.
- A renovation loan. FHA’s Standard 203(k) can cover repairing or rebuilding an existing foundation. The Limited 203(k) is for nonstructural work only. See renovation loans.
- Renegotiate or walk away. Sometimes the right answer is a lower price, and sometimes it’s the next house.
Check insurance early
The Texas Department of Insurance says all-risk home policies usually don’t pay to repair your home’s foundation. Some companies sell an endorsement that adds coverage for foundations or slabs. TDI also says an insurer may inspect the house when you buy a policy, and could charge more or decline if the house is in poor condition.
You need insurance to close. Call your agent during the option period, not the week before closing.
What I know, and what nobody knows
What I know: a foundation issue is a question to answer, not a reason to panic. The seller’s disclosure, the inspection, an engineer’s report, and the appraisal each tell you something. Put them together and you can make a clear call.
What nobody knows: whether a foundation, repaired or not, will move again. The inspector isn’t required to predict it, the appraiser isn’t looking for hidden problems, and soil keeps doing what soil does. Nobody can tell you what the next buyer’s engineer will say when you sell, either. Ask for every past repair record and engineer’s report the seller has, and keep them.
Before you make an offer
- Read the seller’s disclosure for foundation, structural repairs, and settling.
- Line up your inspector and an engineer you can call fast.
- Plan your option period so there’s time for an engineer and a repair bid.
- Call your insurance agent as soon as you’re under contract.
- Send me the address and the inspection report. I’ll tell you how your loan type will treat what’s in it.
The good news: a foundation issue doesn’t mean you have to pass on the house. With the right answers early, you either buy it knowing exactly what you’ve got, or you walk away with your earnest money. Call me at 817-873-6288 or send the short form with the address, and we’ll look at it together.