Buyer's Real Estate Agent and mold remediation cost

General Real Estate Investing
1

I have found a foreclosure property with mold (REI’s love mold, right?). I want to see the property and take photos. I contacted the seller agent. She has a full-time job and can’t show me the property at a time that’s possible for me. She wants me to contact a real estate agent she is referring me to. If I do that, I will be obligated to use this agent if I pursue the deal, right? What’s the downside of this, if any? Don’t I have to pay a buyer’s agent commission at closing, and and doesn’t that affect my bottom line? :help

Also, she told me the estimate for the wet basement/mold remediation is only $5K. From my research, the average cost for mold remediation is $30-50K. I felt like she was really low-balling me. Am I right?

2

If the seller has decided to use an agent, then there will (should) be an agent’s commission on the selling end. If you handle the buyer’s agent end of the deal either by yourself or with, let’s say, a real estate attorney, then I believe that you have an argument to only pay the selling agent’s commission. I am certain that you could write that into an addendum to your offer, but please be ready to handle your end of the deal if you do that. Don’t ask the selling agent to do the work of buying and selling agent, but only collect commissions for the selling agent.
When you are in business, you always need to look at conflict of interest. In the words of almighty Warren Buffet: Don’t go into the barber shop and ask if you need a haircut. The agent’s interest is to see you pay as much money for this property as possible. This is a direct conflict with what you are trying to do as and investor.
A wise man once told me “not everybody’s honest.” Damn straight. First, I would argue that the agent has no idea how much mold remediation would cost. Second, I would argue that the agent is not going to live in the house, or pay for mold remediation, so the agent doesn’t care. Third if mold remediation resulted in a concession in the form of a lower ask price, then the agent loses money, and we’re back to conflict of interest. Finally, unfortunately, I have met more than one sales person who would say ANYTHING to make a sale whether it was the honest truth or a bald faced lie.
When mold abatement is done correctly, it can cost a lot of money. I would rely on your own research rather than the agent’s estimate, and you need to look for dry rot, too. Dry rot could be a huge hidden expense.

3

Thanks for the quick reply. As I am new to this and have never done a deal before, I think it would be wise for me to use a buyer’s agent who can shepherd me through the deal.

As far as the mold goes, after I see the extent of the problem and the other repairs necessary, I’ll have a better idea of what to offer. I intend to make a really low offer, but based on a detailed estimate and with good supporting data to justify the low offer.

I’m operating on the premise that finding the deal is the hardest part. After I get the property under contract, I’ll have time to get the experts in to do mold testing and give me a good estimate on the remediation.

Does this sound like a reasonable approach?

4

If she has an agent showing the house, then she has the house listed and a comission is going to be paid.

Since a commission is going to be paid, go ahead and get yourself a buyer’s agent. As soon as the seller listed her house, you lost the commission amount as a negotiating chip.

You do your own research on costs. 2-3 written estimates for mold remediation would help with the negotiation. However no contractor can give you a firm price until they tear into the walls, and you really can’t be tearing out the drywall in a house you don’t own.

The mold should be tested. Most mold is just ordinary every day mold, and it can be cleaned up pretty easily. But if it is actually toxic back mold, I suggest that you walk away.

There are disclosure issues and liabiltiy issues. There are plenty of houses on the market for you to buy. You don’t need to purchase a problem house.

There are also plenty of house on the market for the home buyer to look at, and they are very unlikely to buy a problem house in this market. So your house would be hard to sell.

With ordinary mold, you disclose that it was tested, it was non-toxic, the source of the moisture was repaired, and the mold was removed. A few buyers will walk, but most can accept that.

If it was toxic mold, they are going to go and buy something else.

And no, real estate investors do not love mold. If the price is really good, it might be a purchase, but I would rather not, and I won’t if there is something else just as good to buy that doesn’t have mold.

If the house has mold, it has water issues of some sort. If the house has mold, it might be necessary to rip into all the walls. You are going to have a hard time determing how much replacement is going to have to be done.

Maybe you will be lucky and repairing a roof leak and wiping the walls with bleach might be all you need to do. But you might open a wall and discover it is in the studs and in all the insulation. There might be ground water issues, and occassionally, those are difficult to remedy.

If you are going to buy a mold house, the price had better be mighty good, and you had better have a really good idea of how extensive the problem is.

5
Also, she told me the estimate for the wet basement/mold remediation is only $5K. From my research, the average cost for mold remediation is $30-50K.

HOLY MOSES! $50K for mold “remediation”. The last whole house mold “remediation” I did was about $20 (2 bottles of Jomax from Lowes)!!! BLACK MOLD - OH NO!

Mike

6

Sounds like a $49,980 game of “Who’s your daddy”!

Keith