US Home Sale Alert: Crumbling Foundations

The issue of “Crumbling Foundations” was known to affect a small portion of northern Connecticut, but has become evident in other parts of that state and now in southern Massachusetts. Below is a brief overview of the issue and the steps NuCompass recommends taking to minimize home sale risks.
 

OVERVIEW
 
What is Crumbling Foundations?  Crumbling foundations result from the presence of the mineral pyrrhotite in the concrete mix which causes slow deterioration of the concrete foundation when exposed to oxygen and water. Over time (which can take several years), these foundations become unsound and the concrete begins to crumble. This condition can also affect poured concrete septic tanks.
 
Which homes are impacted?  Homes built (or modified by room addition or repair, etc.) between 1983 and 2015 can be affected. The cost to replace a foundation can generally run from $150,000 - $300,000. Obviously, this is a significant risk to clients which has prompted NuCompass to implement special processes.
 
Can homes be tested for pyrrhotite?  Currently, inspection by a structural engineer and core-sampling of the concrete walls is the best-known method of testing. Core sampling may cost $5,000, and the test results take approximately 10 weeks to process.
 
What is local government doing about the issue?  The state of CT has established a fund to financially assist homeowners with foundation inspection, testing fees, and foundation replacement costs. An application for funding can be initiated once the homeowner has proof of the presence of pyrrhotite in the foundation walls. The funding covers only a portion of these costs and must be initiated by the homeowner – meaning that third-party companies like NuCompass cannot apply for assistance on behalf of the homeowner.
 
In CT, new legislation and rules have been established to manage funding assistance. For any home sold after February 1, 2019, if it does not have at least a visual inspection by a CT licensed engineer the property/ homeowner will not be eligible for funding assistance. Accordingly, two additional real estate disclosures should now be utilized in real estate transactions:

1. Concrete Advisory and Disclosure for Buyers and Sellers – completed by the seller and signed by the buyer
2. Foundation Advisor for Buyers – provided and signed upfront before the prospective buyer begins their home search 

We are not aware of any special procedures or assistance in the state of MA at this time.
  
RECOMMENDATIONS
 
NuCompass recommends a conservative approach due to the magnitude of the potential cost and long term exposure to a corporation.

For all homes in Connecticut and Massachusetts, regardless of the year built (in part because the homeowner may not be aware of foundation modifications made in the past). we recommend ordering a structural inspection by a licensed engineer. Next steps may include. but are not limited to:

• Proceed with the home sale program if property was constructed outside of the impacted time frame of 1983 and 2015. and if there have been no additions to the property
• Order a core sample – paid for either by the client or transferee
• Suggest Direct Reimbursement of home sale costs with gross up and have the transferee close outside of the home sale program

Home Finding: Since the issue can also affect employees who are moving into these states, we recommend ensuring that real estate agents are aware of required disclosures and advisories; and counseling buyers relative to the risks of considering a home that meets the criteria for a crumbling foundation.
 
Policies: Client policies should be updated to include language that either specifically excludes homes with a crumbling foundation problem or ensure that policies contain general language stating that any property deemed to have potential costs or risks that are unacceptable to the client can be excluded from the home sale program at the discretion of the client. Homefinding policy language should also caution against purchasing a property that could be excludable from the Home Sale program at some later time.