Should You Buy a Damaged House?

buying a damaged home

Fires, floods, hurricanes, sinkholes: These are just a few of the many possible “hiccups” in the life of a house. They happen. Some years bring natural disasters such as hurricanes or floods that cause this type of home damage to happen on a massive scale, such as was the case with Hurricane Harvey and the resulting flooding in Houston, Texas.

People often look at those homes with water up to the tops of the windows and think, “That house is toast! Bring in the bulldozer.” However that’s frequently not true. Very often these damaged houses are very salvageable and, for the savvy buyer, can present a golden opportunity!

Sometimes a little bit of carpentry can go a long way toward fixing something the seller sees as a major issue. It’s just a type of damage, and like any of the others, requires due diligence on the part of the buyer.

Damaged goods, as we all know, sell for short money! Auctions exist for damaged cars, damaged equipment and broken cell phones, all of which are offloaded at a fraction of the original cost and always with enough room to be refurbished and sold at a profit. The same is true for homes.

Sometimes they are sold directly, the same as any other sale. Sometimes they end up in foreclosure and go through the foreclosure sale process. Sometimes they are auctioned off in a large sale, such as the case when a large investor decides to unload 20 flood damaged homes at once. In any type of sale, the price for the damaged home will be heavily discounted because if you’re the buyer, you’re buying the damage too! Now it’s your problem.

Fire, Flood, Storm, Mold and Termites

There must be a thousand different types of damage a home can sustain. The details of each type of damage are different, and it can take a lifetime of experience to learn how to see the telltale signs of things such as termites, which can be both hidden and unknown to the seller. But in the case of a home that is being sold as a damaged property, there is no secret: The place is a mess and there are a few key questions you as the buyer want to ask.

1. Is the damage structural?

The term “structural” means anything that’s part of the “bones” of the house. The walls, the roof framing, the floor framing or the foundation. Structural damage occurs most often in fires and tornadoes and as the result of sinkholes. If the damage is structural, then you’ll want the help of a contractor or an engineer to assess the damage and determine how it can be repaired.

I wouldn’t “run away” from structural damage just because it exists. Sometimes a little bit of carpentry can go a long way toward fixing something the seller sees as a major issue. It’s just a type of damage, and like any of the others, requires due diligence on the part of the buyer.

2. Is the damage still occurring?

Ongoing damage can be an insidious mess. It’s hard to predict how bad things will get by the time you finally get a chance to start repairs. Extreme caution is required and a major price break is essential.

There are a few types of ongoing damage. Mold is one of the worst. Flooded homes often develop mold. Water has gotten into places it shouldn’t and mold starts growing where you can’t see it. I’ve seen a little bit of mold become a veritable petri dish of toxic biomass within a week’s time. It’s important to have a mold expert take a look. But be warned: Mold remediation specialists should be vetted carefully. Fear-based sales tactics are frequently employed and should be considered a red flag.

The slow decay of wiring or pipes is another form of ongoing damage caused by floods. A seawater flood, such as storm surge, is more likely than a fresh water flood from rain or rising rivers to cause this type of damage. Seawater has a way of attaching itself to metals even after it appears to be gone and done. Electrical outlets can stop working and pipes can deteriorate and start leaking months or years after flooding. Tread very carefully.

3. Is the damage measurable?

Certain types of damage can’t be assessed without tearing walls apart. Termites, for example, might have eaten through a foot or two of that 2x4, or maybe they ate the whole wall and the only thing holding the wall up is the drywall and the siding outside. The only way you’ll know is by busting the wall open. But sellers generally tend to frown upon buyers who show up with a crowbar and a hammer! So sometimes the damage is not measurable.

Obviously the concern here is that the damage could be worse than you might imagine and therefore cost more to repair than you had budgeted, throwing off your ROI calculations in a big way.

The best approach in a situation like this is to have a really thorough inspection of the property and be sure to see everything that possibly can be seen. Make sure attics, crawlspaces and every other nook and cranny is inspected. Some inspectors can use thermal imaging cameras to get a look inside walls. It’s an extra cost, but might be worth it.

4. Will the damage impact long-term value?

Previous damage has to be disclosed when you sell and will, indeed, have an impact on the value of the property. Salt water floods and sinkholes are two of the worst offenders.

In these cases, the best strategy is to thoroughly document the assessment and repair process. Being able to show future buyers that you have left no stone unturned and cut no corners in the repair process will help you obtain the highest possible price for your home at resale.

Damaged Goods are Still Goods!

At the end of the day, if you’re in the market for a fixer-upper, a damaged home could be a real blessing for you. Some damages, such as smoke damage from a fire or some wind damage from a bad storm, are easily fixed in most cases and have absolutely zero long-term impact on property values. Other types of damage may require more effort, but then again you paid less and got more house for your money.

As is the case with any fixer-upper, you have to be patient and take the due-diligence period seriously. Great deals can be had!