Mold & other unknown Concerns - Closing on home next week
I wasn't sure were I should post this but I think my conern is a re-hab issue.
I am presently under contract to purchase a SF townhouse that has a tenant in place (who wants to stay- current rent $700)and a good positive cash flow. The appaisal came in about 10% under the contact sales price. Since my contact is contingent on my getting 90% LTV my Real estate agents says I can walk if I want to.
The appraisal stated lots of things that I knew about and plan to repair and replace. This house needs a roof badly. The tenant told me that it has been leaking for at least a year but the landlord had no money to fix it.
The house is also stucco. On the front there is a hole about 6 inches where water is able to get in. I plan to repair and then cover with vinyl siding.
The appaiser also pointed out mold in the basement, which was not noticed before. I think now which I know about it I will need to remedy if I puchase since I will know about it. (There is also some mold in the bathroom)
I would think that I can just clean with TSP and paint with Drylock paint. The basement seamed dry.
Do you think I should be conerned with mold in the walls?
As most of you know mold testing is expensive.
I think I will be getting a good deal on the place but I don't want someelse's headache.
The appaisal came back at $60K I plan to offer $60 plus 2K sellers help ($58net). The houses in the devopment sell for $85-$95K in good shape.
Is this worth taking the risk with the unknown?
Any help, suggestions, comments are greatly appreciated.
Thanks,
Adam
Adam,
If the appraisal came in 10% lower than the offer you need to figure out where that money is going to come from. That puts the house appraised at 54K which is what the 90% LTV will be based upon or a mortgage of $48600 is the max you will be able to finance. That leaves you with $11400 that needs to be paid before you can close not to mention the other problems that need to be repaired. That's more money out of pocket. If all this still seems ok to you then the mold is really not an issue. It really depends on the tenant and the laws in your area if the tenant decides that this is making them sick and wants to sue you.
Adam,
The seller could renegotiate the price to the appraised amount
If you don't buy and it goes back on the market the seller may have the same problem w/ the next buyer.
The seller will also have to disclose the "mold issue" and that may scare many buyers away.
Mold is becoming a big ideal in many states and it must be disclosed to the potential buyer. Many law suits are cropping up w/ dwellers claiming a new chronic illness. I'd think hard about this one
L
Maw,
The original sales price was $66K. I now plan to offer 60K. So the new loan would be for 54K.
I would not put up that much cash I would sooner walk away if we didn't change the contract. However I plan to make a new offer equal to the appraisal so I will meet the 90% LTV.
There is a concern about the potential for being sued. I am wondering based on other peoples experience, if they had some of the signs I have of mold. Did it turn into a huge expense to remedy.
I would like to hold as a rental, and maybe sell 6-7 years out. I don't want to get stuck with a much bigger problem than I thought. To me it seams like a easy fix... but do the signs add up to something bigger.
Have you or the other rehabbers encountered these signs?
Thanks,
Adam
[ Edited by AdamR61 on Date 05/14/2003 ]
Adam, I'm assuming that the apraisal is for the current condition. What is the appraiser's view of ARV? If it is the 80-90K range, then good, but if it is lower, be careful.
If the property currently has mold, you will have to remove the problem, have mold testing done, and still disclose that the property had a prior mold growth if and when you sell. It will lower the value of the property.
I may be confused here, but isn't a townhouse supposed to have HOA that is responsible for the maintenance and upkeep of the roof and outside structures?
Roger
Roger,
The appraiser's view is that if it is in good condition the house is in the 80-90K range. The same house 4 doors away just sold for 95K.
I am in Delaware. The townhouses here come with the land. You actually own the yard and even the parking pad in front of the house. Here they generally call condo's if the HOA is responible for everything. I have not been focusing on condo's since their HOA fees are much higher. The HOA for this townhouse is only $250/year and includes snow removal, common area grass cutting and a pool.
Do you think I can make my attempts to fix the mold and then call an inspector and try to get a clean bill of health?
Do you have any experience with how the FMV may be affected in the future assuming disclosure (5%-10%?).
I presently have a call into my lawyer on the potential liabilty issues involved with this deal... I will give an update when I hear from him.
Thanks,
Adam
At least here, the only liability to you is if you DON'T disclose the prior mold growth. It must be disclosed that there was mold, it was treated (if you do), but the prior mold growth increases the chances of new mold.
I don't think that it really affects the FMV as much as the length of time required to sell the same property without a mold issue. Many potential buyers have been scared by the "dangers of mold" and simply won't buy a property with a mold problem.
Roger
I think a lot of the mold hype is BS developed by Lawyers . However I ended up letting this deal go. The numbers worked great... but the seller would not bring the price down to meet the 90% LTV (she owed too much on existing loan) & I didn't think it was worth coming up with the extra cash taking everything into consideration. I was offering that contingent on a toxic mold screening.
Oh well, the numbers worked really well, but I should be able to find other good deals without the mold...with all the leak issues I knew mold could be an issue, but it was not initally obvious and I planned on taking care of it myself..(what bathroom doesn't have some mold) well this report noted all kinds of health and environmental issues. I knew that if the deal did go through my wife would keep buggin me about the fact that I got some contaminated house and will lose our money... I'll make this a good learning experience.
Still looking for deals in Delaware.
Thanks,
Adam