A house is the single largest purchase that people usually make in a lifetime. To ensure that your investment is sound, there are various actions you can take.
- Check that your realtor is knowledgeable about risks in the area and can identify the telltale signs of problems such as property flooding or drought-related damage to the building foundation. As a buyer’s representative, an agent can advocate for repairs before finalizing a sale.
- Be rigorous in your research. Because property sellers may be reluctant to disclose risks, neighbors and community officials are often not fully aware of them in their neighborhoods, so ask around widely and search the internet for information.
- Look for signs of problems, such as foundation and wall cracks, water marks on the basement walls or drywall, and a musty, moldy smell, as these indicate previous flooding. A recently finished basement (that smells great) could also be a sign of previous flood or drought-related damage. Although the presence of a flood control system (such as a rain blocker or sump pump) may indicate that there is an ongoing problem, some people proactively install these systems for assurance.
- Arrange for a home inspector to assess the property, preferably one who is independent from the real estate agent and who is a member of a national professional association. A thorough home inspection using the latest technologies (e.g., thermal imaging to augment standard moisture readers) can reveal hidden water damage or basement moisture issues. Be aware that home inspectors are not required to collect or report information, and they are not automatically trained to identify water management risks.
- Check the residential real property disclosure report, but be skeptical since a seller may be reluctant to fully disclose previous problems. On the other hand, it is in the seller’s best interest to disclose to guard against possible future litigation from a buyer.
- Ask your realtor to request a loss history report for the property, either a Comprehensive Loss Underwriting Exchange (C.L.U.E.) or an Automobile-Property Loss Underwriting Service (A-PLUS). These will reveal any insurance claims made against the property in the past five-to-seven years. Although loss reports are only available to individual property owners and insurance companies since the information is protected by federal law, a buyer can request that the report be supplied during the home-buying process.
- Request that the seller take action to mitigate any problems. If you think that the property is prone to flooding or drought-related damage but would still like to buy it, you can request that the seller take appropriate action to reduce your risk.
For an expanded version of the information on this page, check out this factsheet (PDF).