Sell a House With Foundation or Sinkhole Problems — As-Is, for Cash

Foundation problems in Pinellas, Hillsborough and Pasco

West-central Florida sits on limestone. Rainwater turns slightly acidic as it moves through the soil, dissolves the rock, and leaves voids. When the sand above a void slumps into it, you get a depression or, rarely, a collapse. The Florida Geological Survey calls this karst terrain, and it is the reason the state has a sinkhole helpline and a Subsidence Incident Report database. Most entries in that database are unverified; a licensed professional geologist or engineer has to confirm a true sinkhole, and the state does not inspect private property.

Most cracked houses here are not sinkholes. The typical Pinellas home is a 1950s to 1970s slab-on-grade block house with shallow footings on sandy fill. Settlement from compacting fill, a broken drain line washing out soil, tree roots, or a slab poured over old debris produces the same symptoms: stair-step cracks in the block, separated window frames, a floor that slopes toward one corner, doors that stick. The symptoms look alike to a buyer, which is the problem.

The only way to tell the two apart is a geotechnical investigation by a licensed engineer or geologist, and that is where a seller's money starts going before the house is even listed.

Florida sinkhole law in plain terms

Fla. Stat. § 627.706 splits the subject in two. Every insurer writing property coverage in Florida must cover catastrophic ground cover collapse. That is defined narrowly: an abrupt collapse of the ground, a depression visible to the naked eye, structural damage to the building including the foundation, and the building condemned and ordered vacated. The statute says in plain words that settling or cracking alone does not qualify.

Sinkhole loss coverage is different. The insurer must offer it for an additional premium, and may inspect the property before issuing it. It pays for structural damage caused by sinkhole activity, and "structural damage" has its own technical definition: floor or foundation displacement beyond accepted variances, load-bearing walls out of plumb past the middle third of their base, imminent collapse, or substantial structural damage under the Florida Building Code. A few cracks do not meet it.

When a sinkhole claim is paid, § 627.707(5) controls what happens next. The policyholder must sign a repair contract within 90 days of the insurer confirming coverage, repair according to the insurer's engineer's recommendations, and finish within 12 months. The insurer can hold payment to actual cash value until the repair contract is signed. Under § 627.70132, notice of any property claim is due within one year of the loss.

What a sinkhole report does to insurability and resale

Here is the part owners do not expect. Under § 627.7073(2), an insurer that pays a sinkhole claim must file the engineer's report and certification with the county clerk, who records it. In Pinellas, Hillsborough and Pasco that means the report sits in the official records alongside the deed. A title search finds it. A buyer's insurance application asks about it. It does not expire.

What happens next depends on what was done with the money:

• Repaired and certified. If the stabilization was done to the engineer's plan and there is a completion letter, some carriers will write the house with that letter in the file. Under § 627.707(7) an insurer may not non-renew over a sinkhole claim if the house was repaired per the engineering recommendations.
• Paid but never repaired. This is common. A previous owner took the payout, patched the stucco and sold. The report is still recorded, the ground was never grouted or underpinned, and carriers treat the house as an open risk. These are the hardest houses in Tampa Bay to insure, which makes them nearly impossible to finance.
• Repaired without a claim. If you paid for piers or grouting yourself, keep the engineer's report, the permit and the contractor's warranty. Without paper, a buyer assumes the worst.

On the resale side, the word "sinkhole" on a listing cuts the buyer pool before anyone looks at the house. Financed buyers mostly cannot get the loan, and the rest price in both the repair and a discount for the history. A house with a recorded report is usually an uninsurable house until someone spends real money on it.

What you have to disclose

Two rules apply. The general one comes from the Florida Supreme Court in Johnson v. Davis, 480 So. 2d 625 (Fla. 1985): a seller who knows of facts materially affecting the value of the home that are not readily observable and not known to the buyer must disclose them. Settlement you have been told about, an engineer's report in a drawer, a past repair: all of that qualifies, and an as-is contract does not remove the duty.

The specific one is § 627.7073(2)(c). A seller whose own sinkhole claim was paid must disclose to the buyer, before closing, that a claim was paid and whether or not the full amount of the proceeds was used to repair the damage. If the claim was paid to a prior owner, that section does not name you, but the report is in the public records and Johnson v. Davis still covers what you know. Talk to a Florida attorney about how to word it. With us, you just hand over whatever reports you have.

Why lenders refuse, and how we buy

Fannie Mae's rules tell the story. An appraiser who finds damage that affects the safety, soundness or structural integrity of a house must rate it C6 and make the appraisal subject to repairs, and a loan on a C6 house is not eligible for sale to Fannie Mae until the repairs are done. The lender also needs a bound insurance policy, which brings the recorded report back into the picture. A financed buyer can want the house and still be unable to close.

A recorded sinkhole report or a settling slab is a repair budget to us, not a reason to walk away, and the sale works the same way it does for any other house we buy.

1. Send us what you have: engineer's reports, the old claim file, repair invoices. If there is nothing, that is fine. We walk the house once, 15 to 30 minutes, and if we need an engineer's opinion we hire one at our cost.
2. A written offer, typically within 24 hours. Renovated value, minus the stabilization (grouting, underpinning or piers as the engineer specifies) and the cosmetic repairs, minus holding and resale costs, minus our margin, with a line for the resale discount a sinkhole history carries. You see every line, and if listing would net you more we say so on our compare page.
3. Closing in as little as 7 to 14 days when title is clean, or on your schedule. No fees, no commissions, and we pay the normal closing costs. A mortgage and any liens are paid from the price by the title company.

After closing the engineer, the foundation contractor and the permits are ours. You do not fix a crack, order a test or explain the report to anyone again.

Related: Uninsurable house · Hoarder house or major repairs · Hurricane or flood-damaged house · all situations we buy

We are a cash home buyer, not a law firm. This page is general information about Florida law and local process, not legal advice. For advice on your situation, talk to a Florida attorney — we work with several and are glad to make an introduction.