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Old 08-30-2014, 12:36 AM
 
1 posts, read 2,845 times
Reputation: 11

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We built a home nearly 10 years ago with a prominent Denver based home builder. We had foundation issues that were resolved 7 years ago,the builder refused to underpin the entire foundation as our independent engineering report recommended and instead underpinned about half per their engineer.

We moved out of the home two years ago for a new job, we leased it to someone and they decided not to renew their lease after 2 years. We wanted to take advantage of the real estate market in Denver right now so we listed it for sale. We did a property inspection of the home a few months ago and saw cracks and foundation problems coming back but seemed somewhat mild. We contacted the builder and warranty company immediately since we still have less than a year left on our 10 year warranty.

We were shocked to learn that they want to underpin the entire foundation now, basically what they refused to do 7 years ago. We're still waiting for bids from contractors but how the warranty company works is that they cut us a check directly and it's then our responsibility to get the repairs done with one of the 3 contractors they picked for bids. The house has been vacant for a couple months and we've lost out on two offers plus losing a lot of money paying the mortgage without a renter. We had a full price offer with a contingency on their house selling but they wanted to rent ours until they could close, fell apart after they learned of the new repairs needed. A week later we received a good offer from a great buyer and after 4 days of being under contract, that deal just fell through after they started reviewing the recommended repairs (understandably worried about resale issues and their lender objecting). We were told a 3rd couple was interested but their family encouraged them not to go with our home due to the foundation as well.

We don't know what to do. Obviously we'll likely be consulting an attorney next week about all of our options/paths but curious what other people would do. Are we stuck renting this house out forever because we can't sell it, do we try to sue the builder and get them to buy the house back, take the money and run from this nearly decade long nightmare.... Every situation seems to have financial risks and/or alter our new life where we are now.
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Old 08-30-2014, 07:11 AM
 
9,567 posts, read 5,762,603 times
Reputation: 9636
It sounds like you are in the process of getting bids for repair and your warranty company will cut you a check for the repairs. Is that right? If so, I'd take it off the market for the time being and rent it if you can while repairs are being completed. I'd then put the house back on the market in the spring after the repairs are done.
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Old 08-30-2014, 07:31 AM
 
Location: The Berk in Denver, CO USA
13,946 posts, read 20,190,335 times
Reputation: 22564
1. Fix it.
2. Determine what words you are going to have to write in the Seller's Disclosure.
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Old 08-30-2014, 09:10 AM
Status: "Celebrating 30 years as a Broker" (set 18 days ago)
 
Location: Just south of Denver since 1989
10,882 posts, read 29,307,638 times
Reputation: 7085
I too had foundation issues. Basically the builder smashed the sewer line in front of my new house. I had 32 drywall cracks in the house, becasue my house was sinking into the ssewage water. They fixed it, I over disclosed to buyer. Sold for more money. Went to my new home happy. Also the same day the buyers moved in, my neighbors told thee buyer all that had happened to the house. They laughed, and said we already know.
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Old 08-30-2014, 10:27 AM
 
Location: Denver and Boston
1,701 posts, read 1,528,101 times
Reputation: 3464
Quote:
Originally Posted by FoundationWoes View Post
We don't know what to do. Obviously we'll likely be consulting an attorney next week about all of our options/paths but curious what other people would do. Are we stuck renting this house out forever because we can't sell it, do we try to sue the builder and get them to buy the house back, take the money and run from this nearly decade long nightmare.... Every situation seems to have financial risks and/or alter our new life where we are now.
I don't know enough about such lawsuits to advise you on whether you have a case against the builder or not. A lawsuit could be the best path for you. I own a few such houses that have had their foundations repaired which I use as rentals. I have had one for 10 years, one for 7 years and one for 5 years. There are investors that will buy the property now, but they will expect a significant discount from FMV (say 25+% off FMV). I doubt you are going to get a FMV price now for the house regardless of what certificates and guarantees you have. Based upon what you describe I would speculate that as long as additional foundation problems don't pop up in the next five years, you can get a FMV 5 years hence the new repairs. What part of the metro area (intersection) is it in?
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Old 08-30-2014, 10:57 AM
 
11,256 posts, read 43,182,783 times
Reputation: 14904
This is a likely going to be a recurring problem with the bentonite soil issues of this site.

Underpinning the foundation is only a temporary stopgap measure.

The real long term solution, which will likely be very expensive, is to properly prepare and drain the building site so that the underground water sources are kept away from the foundation area. I've seen many houses in the Denver metro area for decades where the builder didn't do this and closed their eyes to the bentonite potential for a given site, all the way up through entire subdivisions with a problem. Some of the houses, such as Medema's 1st filing in Williamsburg (Ken Caryl), could only be mitigated by tearing down the house and starting over; this was less expensive than attempting stop-gap repairs.

If your house is in a subdivision that has sub-surface water flow problems, your evaluation of the problem isn't limited to an engineer's report for your site alone. Again, looking at Medema's houses ... they graded the lots to control the run-off water away from the foundations and specified in their original buyer contract and HOW warranty that the sites were not to be regraded. Unfortunately, the grading interfered with the functional use of many of the lots. In time, new owners wanting to utilize their property regraded and created sub-surface water flows that affected downstream house foundations with expansive soils. Houses that previously didn't have foundation problems suddenly started having cracks and failures, especially in a wet spring climate year.

The problem isn't limited, by any means to just a few subdivisions in the Denver area. A family member with a scrape and new house just by Old Crestmoor bought a house recently with this exact problem scenario. The developer/builder scraped two adjoining lots with solid houses/foundations and built new 7-figure houses on the sites. He also did the same on a few nearby in the area. Both the new houses exhibited cracking foundations/sagging walls/cabinets and doors that didn't fit anymore within the first two years. The builder knew of the problems and did not disclose them to the buyers. Our family member house sat unsold to knowledgeable buyers for three years, when the construction loan was foreclosed. The house was put back on the market by the bank from their repo file, and the bank didn't disclose the structural issues but did have some superficial remedial work to the foundation (cosmetic, not structural work). Within the first year of ownership, the foundation was failing. Engineering reports varied from significant foundation rework and site prep (French drains, pumps, etc) to tearing the house down and starting over to develop the site. The neighbors in the adjacent house finally admitted that they'd had similar problems from their first year of ownership when they bought the house upon completion of the structure, but they hadn't wanted to diminish the prospect of selling the house at FMV. Both houses have had substantial remediation work and recurring problems every year since being built, yet the previous houses had no problems. The difference is that the sub-surface water flows were altered with the new house sites not diverting surface water away from the houses and the nearby new foundations/site grading by the developer saturating the ground at these two houses.

IMO, your likely best course of action will be to get the current remediation performed as best as possible with the funds that the warranty may provide, disclose in the listing that a problem had occurred and was "fixed" per the engineers, and then sell the house for whatever is may bring. Anticipate that you'll not get a comparable FMV price point to area houses without the bentonite problem your house has; ie, unload it for as much as you can at this point but be prepared to take a loss on this place to get rid of it. You will be inviting a lawsuit in the future if you do not disclose the problem and remediation to the house foundation to any agent or buyer, when, not if, the problems happen again. Keep in mind that many folk (including engineers, builders, real estate agents/brokers, and prospective buyers) do not have any familiarity with bentonite soil building conditions or the consequences of not properly preparing a building site to deal with these issues. This is an oft-repeated problem in the area, and you won't be the first to have an adverse outcome from having bought such a property. Denver's real estate market is "hot" right now and you may be able to walk away with a minimal loss. Good luck with your sale.
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Old 08-31-2014, 12:26 PM
 
Location: Littleton, CO
3,111 posts, read 4,881,407 times
Reputation: 5429
As someone who has lived here for all his life, I am going to tell you something you don't want to hear.

I would never buy a house that has had foundation problems. When I last looked at houses nearly 20 years ago, my real estate agent (a family friend in the business 40 years in Denver) and I went to look at a house that did not mention the issues in the notes. While we were there I saw the signs of foundation problems -- cracks, sagging, etc.-- and immediately told my agent that there was no way I was going to buy that place. He told me that was good, because there was no way he could have let me buy that house and represent my best interest.
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Old 08-31-2014, 07:07 PM
 
91 posts, read 146,814 times
Reputation: 138
Complete the fix, disclose that its been fixed and sell your house - and no -you wont take some huge financial loss. I have looked at many houses for sale in many areas of greater Denver, and guess what - they ALL had some degree of settlement and the resultant effects on the house. A couple of them were just crazy - I would estimate 50k to 60k in restoration costs to get them back to "no issues" and they sold, as they were, for what I would consider a premium price. Some people care about every little thing wrong with a house, some people do not. A house that has settlement issues has to be very, VERY bad before it actually becomes a structurally unsound house. Don't lose sleep over it, you'll be just fine.

Last edited by ArthurDaly; 08-31-2014 at 07:08 PM.. Reason: Typos
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