I think I made a huge mistake. I bought this property at an auction without prior inspection. Checked it out yesterday and found there are a lot of problems:
Upstair shower leaks heavily (which can be fixed easily)
The leaks caused downstair kitchen cabinet inside wet with large visible amount of mold. According to the assocation vice president, they had two other units with similar problems that cost up to $45K to fix!
other cosmetic problems (paint, window screen etc).
Here are the financial terms:
Bought at $178500
Similar property listing price is $280000
A smaller unit is listed between $235K to 259K
Lender forclosed amount was $259K.
Here are my questions:
The lender did provide an inspection report for me to sign whichi disclosed local termite and some dry rot problem. But nothing about mold. Can I back out with this reason?
If not, is there still any financil gain to be made with deal?
Thanks,
Jennifer (first time on this board and first time buying at auctions).
45000 to repair mold around kitchen cabinets???javascript:replaceText(’ :rolleyes’, document.forms.postmodify.message);
rolleyes
rip em out and replace them !!!
go to home depot get basic cabinets with real wood doors for a few thousand at most !!
hire a local handyman/carpenter who runs ads in local paper and have him install for you.
you normally would want to upgrade your kithen anywaze with new counter also
right??
make lemonade from a lemon :biggrin
sorry for prev. reply javascript …ignore…
45000 to repair mold around kitchen cabinets???
rip em out and replace them !!!
go to home depot get basic cabinets with real wood doors for a few thousand at most !!
hire a local handyman/carpenter who runs ads in local paper and have him install for you.
you normally would want to upgrade your kithen anywaze with new counter also
right??
make lemonade from a lemon
I posted my first email in a hurry. Here are more facts:
This is in California. Is the lender required to disclose the mold problem here?
The market rent is $1600 so it can be rented for $1400-1500 easily. So If I can’t back out of the deal, should I sell it (obviously the market is depressed right now) or rent it?
If replacing the cabinet and drywall (if with mold) can fix the mold problem, then my maintenance guy can fix it easily. So it may not look like too bad of a nightmare…
go look for youself @ condos listed for sale
see what kind of upgrades they have done to the kitchen
most importantly see if any sales have actually been made in the last 2 months and for what price.
if you can sell for 280k or close to it , a unit you bought for 100k less… why back out???
Hi Jen, you have raised a question in my mind that may have some bearing on your problem. I have heard (hearsay only) that mold must be remediated and there are companies that do this (Mold Remediators). Curious , if you can just remove the mold you see (yourself) and have that be sufficient or will it come back once removed . Is there some place that makes record of a mold problem and demands remediation in a professional way , OR WHAT ? Hope this doesn’t add to your concerns but can be helpful with a reply from someone who knows more than I. Your pal, Mike
you would be amazed what you can do with bleach and a spray bottle !!!
also a spray can of KILZ is great to use before repainting any mold or mildew stains :smile
I think that CA law requires that you disclose the problem, even after remediated - this is whether you are selling or renting.
There might also be a problem with insurance coverage.
In CA do not even look at what properties are listed for, I think at this point that is irrelevant. You need to look at what properties have sold for in the last two months.
Thank you Duh and Microb and reihooked for your replies!
The only sold comp I found this year is a smaller unit (800+sf vs. 1000+sf and 1bath vs 1 1/2 bath) on the same street as the one I bought. That unit was sold at $300K back in 2/2007.
The one that is currently listed for $239K-$259K is a little strange. It is the exact same model as the one sold in 2/2007, but about 100sf less. The owner bought it in 2004 for 285K! Looks like another distressed sale to me!
hi again
by the way is this a single fam. house in a subdivision
and how old is it ??
and what kind of auction?
how did u pay only 178K if foreclosure price was 259k
and how did lender give you an inspection report?
where was this auction held ?? @ the property or at the courthouse??
I called the lender and told them that there is large amount of mold that should have been disclosed on the disclosure form. The lender admitted that mold indeed should have been disclosed but also said that I should have inspected the interior myself prior to the auction as well.
I agreed. Told him that we both have some fault in this deal. He said he will work with his supervisor and call me back to let me know what they can do about it.
At this point, I am undecided as to what to do:
If he offers me to back out the deal, should I take it? With the possiblity that it may be resolved by a bottle of bleech or replacement of cabinet, this may still be a good deal?
If he offers some compensation, what would be a reasonable amount? Obviously the best case would be $45K but I don’t think that would be possible.
The safest option for me is the lender offers to fix the problem. I doubt that would be possible, though.
Duh:
Just saw your reply when i am about to post my update. To answer your question, this is not an auction at the court house. It is a large scale auction (hundreds of houses) offered to public. The one I bought is a Condo. The lender foreclosed at $258K because that was the amount the previous owner owned, right? But no one wanted to bid higher than 178500 so I got it. I didn’t even participated in the beginner but raised my hand at the last call because the number looked too good. Now I know why, though. At any rate, I still have hope that this may still be a not too bad deal… keeping my fingers crossed!
I think that this is a huge risk.
If someone got sick in that place after you rented or sold it, you could not get away with saying “but I used bleach and replaced the cabinets.” This is going to require professional remediation, but then who is going to pay full price for that when you go to sell.
The problem is that you really don’t know the extent of the damage, you can almost bet the there is mold throughout the ceiling and probably behind the walls. You are going to have the cost of tearing everything down and putting it back up.
I know other investors would advice you to do the minimum and get rid of it. In this case - it would be very difficult to get away with this, everyone knows about the problem.
In a normal sale in California the seller is required to give the potential buyer a Transfer Disclosure Statement (TDS). In the TDS the seller is required to list everything he/she knows about the property. Since the lender sold the property they are exempt from issuing a TDS. The reasoning is that since they didn’t live there how would they know the condition of the property?
Good luck on getting anything from the lender. Keep us updated.
Ok… Just talked to the bank again. Unfortunetly, Teksch is right that the bank is not going to do anything about it. Cancelling the contract is not an option. The person I spoke with gave me his supervisor’s name and number so I will have to talk to the next level up to see what is going to happen. Not very optimistic though.
All those problems reihooked mentioned are exactly what was on my mind the first time I saw the mold. I have lined up a maintenance guy who is very skilled in construction. He can install drywalls/cabinets and fix any water pipe problems. He charges $150 per day. If we ended up have to do everything, as long as it can be done in 20 days or less, I think I can still come out ahead. Is this possible?
The association’s vice president told me that the association may be responsible to repair everything behind the walls because they are considered common area as long as I didn’t cause the problem by negligence (The condo uses common water meter so the association pays for water bills for everyone). Anyone ever heard such a thing?
Thanks everyone for posting and please share with me your views/thoughts/ideas/experiences. I thought this would be a fun thing to try out … but at this time, it is getting harder to justify it:)
I would first try to sell to another investor who enjoys risk more than I do.
If that doesn’t work -
The maintenance guy can do the work when you are putting the place back together again, but you might want to use a professional remediation company ($$$$$) to remove the mold.
I know that they are expensive but they can give you an official OK that everything is fine - to me that would then shift the responsibility to them if later there is a problem. They are the experts.
Good break about association taking care of commom walls.
I actually like the idea of selling it to another investor – maybe a handyman. He can definetly make some serious money then!
Another thought:
What if I fix the problem, and then hire an inspection company to certify if there is any mold problem? Is there such a company? If so, will that clear my responsiblities? Just trying to see if there is any cheaper and safe option.
I don’t know what part of California you are in, but if you Google “mold removal California” or “mold remediation California,” you will get results of companies from San Diego to San Francisco that specialize in cleaning up mold.
I don’t think an inspection company can guarantee that there is no mold. This has to be done by mold testing not by visual. Even when the mold inspector sees mold he can’t say it is mold, only the lab test can say that it is mold.
If you get a remediation company they usually guarantee that there is no mold (or that it is at acceptable levels) by tests and that if mold grows back or is found (within a specific time frame) they will come and reclean it.
I knew someone who worked for a remediation company years ago, the remediation included other stuff besides removing the wet stuff -
spraying the mold poison
sanding down the 2X4 after drywall removed
wiping everything down
keeping different areas sealed so that the mold does spread out even more
All this while wearing the white suits covered head to toe.
The bank finally agreed to send someone to fix the water leak problem. And told me that “we will assess the damage after the fix and see what we can do”. The service man is there to work on the problem as I type. I also asked HOA president to check the job and make sure the repair man knows the extent of the problem.
Not sure how the repair will go. But at least I am making some progress. The bank told me that they will call me back when the repair is done so I can inspect it again.
Also, consulted an attorney who said that a buyer still has some rights with foreclosure properties and in my case, there is a chance I may be able to get out of the contract if that is what I really want (basically something about the misleading inspection report).
Ok… things are looking a little better. Once the leak is fixed, I will talk with the bank and HOA about the mold issue again…