In a market where flippers or sellers sometimes plaster over issues in the pursuit of the all-mighty dollar, here is a case study on how to do it right.

You may recall our 2br/2ba, 976sf cute bungalow in Central Phoenix that closed just last week. The sellers encountered a problem. There was a minor bit of settling around a stem wall, where some plumbing work had been done, or there had been some leaking over years. The source of the problem is inconclusive.

They called a foundation repair specialty company to give them an estimate for repairs. I can’t say exactly what the amount was, but it was significant. So significant that they did not have the available cash to fix it. Furthermore, it would take more than a month for the foundation company to get around to this job, and the sellers needed to get the property sold.

Naturally, we advised them to disclose this material fact of the sale. To do otherwise would have left them open to law suits in the future. They disclosed the issue on the Seller Property Disclosure Statement and made it public.

They had several options.

They could have just disclosed the problem and reduced the price by the amount of the estimate for the repairs. The problem with this approach is that it creates an incentive for buyers to offer even less for the home, even though the sellers have an estimate for repairs. Further, it narrows the field of potential buyers to those who can afford to do the repairs at some later date.

They could have disclosed the issue, kept the price where it was and simply said, “Hey, it’s an old house. That’s the way it is around here.” They would be hoping, of course, that the tight home market would result in a sale anyway. Our advice was that such a move would probably mean they would not get an offer right away, resulting in a “stale” property that sits on the market for months because people see that others have not made an offer. This would result in a series of price reductions that would probably reduce their profit even further than if they just fixed it up front.

So, our advice: disclose, initiate a work contract with the foundation company to be completed after the sale of the home, with the cost of the work being subtracted from the sale profits and held by the title company. When the work is completed, with a warranty, the foundation company is paid from the escrow account.

This is not idea, but it meant that the sale could go through, the buyers could move in and know that the work would be completed with a multi-year warranty on the work.

It all started from the sellers being up-front about the condition of the foundation and willing to cut their profits, but also their losses.

When you sell your home, consider using an experienced team like us who knows how to solve problems.