Monthly Archives: May 2014

Mold & Radon: Scourges of real estate sellers

Real Estate-Purchases, Real Estate-Sales
mold
If I was looking to start a new business, I would get into the mold and radon game. Those guys are busier than sin and they have a captive market: Home sellers in the middle of a contract.

It used to be that about 5-10% of home buyers did radon tests. But home inspectors must have gotten discounted memberships to the National Society to Eradicate Radon in Our Lifetime. Now, about 70% of buyers do radon tests. Well more than half of the radon tests flunk. The seller has to install a radon mitigation system for about $1200.00. That consists of capping the sump pump pit and using a small fan to push all of the radon gas through a pvc tube outside. Radon has a standard of 4.0 pcl or less. Anything higher than that has to be mitigated (brought down to under 4.0).

Those same inspectors are crawling into the attics of homes and finding boatloads of mold on the plywood sheathing. The mold appears because bathroom fans were vented into attics and over many years, mold grew. If mold is found, then the seller has to have a mold remediator get rid of the mold. That costs between $1200.00 and $3000.00. The mold remediation business has grown tremendously in the past few years. I wrote this post in 2004 saying that mold problems were increasing, so this is not an overnight occurrence, but  since then they have exploded.

Mold is found by the home inspector by simply looking at the plywood in the attic of a house and if there is mold there is a dark staining on it. There are two approaches to mold remediation once it is found:

1. An Industrial Hygenist (who is paid about $400-$500) tests the mold then draws up a remediation plan for a mold remediator (other than the hygenist) to work on.

2. A mold consultant comes in and does NOT test the mold, but just removes it all.

Most sellers taking the route described in number 2. Many times the mold will not be harmful or will be in a small area. Since the parties are in the middle of a real estate contract (and there are people who could get sued) everyone takes a scorched earth, remove every spec of mold approach.

I see little to no testing done.  My opinion is that air quality testing is a waste of money. I was surprised that the Illinois Department of Public Health has NO STANDARDS for mold testing and does not recommend testing the mold or the air at all. So why is everyone freaking out and removing all this mold? I’m not sure, but buyers want the mold gone, so that’s what happens. The unlucky seller whose buyer gets a flunking radon test and a flunking mold test will be out of pocket $2500.00 or more before he knows what hit him.

Here are some mold remediators that I have seen on files:

Mold Solutions

Indoor Air Repair

Mold 911

Alliance Restoration 

Appraisals coming in short this spring

Mortgages, Real Estate-Purchases, Real Estate-Sales

appraisalLast week, I had 6 properties appraise for less than the contract sales price. It ‘s not real fun when this happens. No news is good news when it comes to appraisals, but when I get an email with an appraisal attached I know things are about to come unglued.

Seller’s instant reaction = “I am getting scr**** by the buyer’s lender and I am NOT cutting the sales price.” The seller’s  second stress induced reaction is “I’m going to “fight the appraisal” (good luck with that, tiger).

Buyer’s instant reaction = “I can’t believe I overpaid for the casa of my dreams and I hope the seller doesn’t cancel the contract.”

Fortunately, the amount by which these properties under appraised was between $5000.00 and $14,000.00 and the parities were all sensible. All of them were resolved without tanking. Half of them “met in the middle” and for the other half, the seller reduced the price to the appraised price.

Usually when a property appraises low, I estimate that about 75% of the time the end result is that the seller cuts the price to the appraised price. If the appraisal is for an FHA loan, the seller will be stuck with that appraisal for 1 year even if the contract cancels (and a new FHA buyer comes in).

I find that it is nearly impossible to “contest” the appraisal. Appraisers rarely change the result of an appraisal. There is supposed to be no way to communicate directly with the appraiser. I find that when the parties try to contest the appraisal that 2 to 3 weeks are wasted while the loan processing comes to standstill and closing is delayed.

The spring market has been very fast moving with multiple offers on many homes within a day or two the listing hitting the internet. I’ve seen a lot of contracts at or over list price. Sellers are getting more for than they expected in some cases and there are not the comparable sales to support the appraisals.

If you are a buyer be sure to add an appraisal contingency to the contract. The mortgage contingency will act like an appraisal contingency unless you are putting a ton of money (50%) down and then it won’t work and you need a separate appraisal contingency. If you are a seller, just be aware that selling for list price is cool, but it may be cut after the appraiser trots through.