Is the dirt around a home supposed to stay below the tar line for water proofing?

Ideally the dirt should not be above that tar line primarily to prevent surface water from breaching over the foundation. But when the grading is sloping towards the house now you have a situation where surface water is directed toward the house where it will soak into the ground next the the house where seepage through foundation cracks or in severe situations in through the joint where the basement floor and wall meet will be a greater possibility. I was a waterproofer for 16 years and saw this condition at almost every home that had seepage issues. I do not see a problem with taking the grading up above the tar line if that will ensure a good slope for surface water to shed away from the house. You could always buy a can of liquid tar and extend the tar dampproofing up higher but in my professional opinion that is not necessary as there will be little to no hydrostatic pressure at the top of the foundation to where a coating is needed.

Proper grading and extending the the downspouts are the 2 best improvements you could make towards having a dry basement. Fixing any cracks is next and if you have a sump pump make sure the pump is 5 years or newer and if the home has a battery backup you do not want old batteries as they need to be replaced every 4 years.

@Cruiser Thank you so much! Would you be reluctant to buy a house with this situation?

@JLeslie No I would not. There would be many other things I would be more worried about because regrading the exterior is easy and in the case it is not practical to do so you can install French Drains next to the house around the perimeter that will then drain to water to a low spot somewhere on the property.

A foundation that is suffering settling would be a deal breaker for me, overall visible neglect would be a deal breaker for me as it will show a lack of care by the previous owner unless you are looking for a fixer upper. Most anything else can be negotiated after a qualified inspection except wood boring insect infestations….

I have to share my house horror story. We found the house of our dreams the one we now live in and it had been vacant for a year and upon inspection the inspector found dead Powder Post beetles pretty much all over all over the lower level. Only termites are more destructive but termites are relatively easy to eradicate Powder Posts are not and the entire house would have to be tented and fumigated to get rid of them. Plus there is no way to fully determine the extent of damage they cause not guarantee that they wouldn’t come back. Two other inspections by professional exterminators confirmed what we feared. Our Realtor was not ready to surrender the fight and she found an exterminator who came in the door. took out a magnifying glass as these bugger are as small as an ant…she looked up and around and made a beeline straight for the lazy Susan in the kitchen and there was a box of Fruit Loops tipped over behind the Lazy Susan just teeming with these bugs. She announced these were in fact Drug Store Beetles that are completely harmless.