Buying a house with water damage is possibly a risky investment, but knowing what precautions to take helps limit your potential loss. Water damage to a house may be caused by many different problems, including flooding, a burst pipe or a leaky roof. Other defects and hazards may be present in the home due to the water damage, such as unsound walls and mold, and the cause of the water damage needs to be examined to ensure the problem will not continue once the existing damage is addressed.
Schedule a home inspection. The extent and cause of the water damage needs to be established by a professional before you consider bidding. The home inspector will note the estimated costs to repair the damage. Ask the inspector about the cost of repairing the source of the water damage if the problem still exists. Request a copy of the home inspection report.
Contact a Water Damage Contractor who has experience in water-damage and mold repairs and remediation. Give the contractor a copy of the home inspection. Ask the contractor about the cost of repairing the damage and cause, if applicable, for a second opinion. Have the contractor evaluate the home if possible. You need permission from the homeowner in writing if the contractor has to open up any wall areas or perform intrusive tests to check for hazards relating to water damage, like mold. Get opinions from more than one contractor to ensure the accuracy of the estimations as well.
Review the home inspection and contractor reports. Write down the total estimated cost to repair the water damage. Get the market value of the home by contacting local real estate agencies and asking for sales data for comparable houses in the area. Subtract the repair cost from the home’s market value. Your bid should be around the resulting figure, but pick a lower bid to open negotiations with the seller.
Submit a bid to the seller. Note in writing that your bid is taking the water damage into consideration. Have your real estate agent prepare the bid if you are using an agent. Negotiate with the seller and make counteroffers if necessary.
Request a copy of the sales contract. Review the contract to ensure all the terms are correct and any contingencies you added, such as the home being able to qualify for homeowner’s insurance, are present. Contact an attorney to have the contract reviewed if you are unsure about any terms. Sign the contract when ready.
Apply for a mortgage if you need financing and have not already done so. Obtain loan quotes from multiple lenders to ensure you are getting the best terms available to you. Select the lender who offers you the best terms for the mortgage you want. The U.S. Department of Housing and Urban Development offers 203(k) loans through private lenders that are specifically designed for purchase and rehabilitation, so ask each lender if the 203(k) is available.
Obtain homeowner’s insurance quotes. A homeowner’s insurance policy provides coverage against damage and other loss to the home. You may not be able to get a comprehensive policy until the water damage is repaired, but a more basic policy may be available in the meantime to protect your investment.
Close the deal. Once the mortgage papers are signed and the deed is filed in the county recorder’s office, the home is legally yours. Begin water-damage repair as soon as possible before you move in. Waiting can make existing problems worse.