Excessive Mold - Need Hints On Methodolgy

[TEL2002]

Doing an REO. Subdivision 5-10 years old. $180-220 range, mostly colonials.

Basement was finished and divided into 4 rooms. Mold is 5-7 feet high on ALL drywalled walls - but not on concrete block wall. It is almost as if you had drawn a line around the room & put excessive amounts of mold below the line. The line is not at the same heighth in all rooms. Basement had been carpeted, but the carpet has been removed.

Except for mold/mildew odor, the upstairs areas are in good condition - no cost to cure items. Tastefully and attractively decorated and well maintained.

Obviously all of the basement interior studs/drywall will need to be torn out, and an environmental inspection needs to be done.

QUESTIONS.......
1. Assuming the mold is all cleaned up and the place receives a 'clean bill of health', what impact can be expected in buyer resistence?
2. What methodololgy would you recommend for determining impact to the estimate of market value?
3. Are furnaces & ductwork typically removed and replaced in these type of situations?

Any direction assistance you can provide will be deeply appreciated. I know we have lots of "guru's" on the forum.

 

[jtrotta]

TE

oh boy, yer in fer some fun

1) ifn it's all cleaned up - where's the resistence comming from :question:

2) Your going to have to find other similarly "tainted" properties for that answer - ya just can't make it up

3) That would be determined by the "Environmental" expert; - case closed

years back I had done a property that was close in proximity to a tainted landfill - the neighbor just before ya got to the house had a 4' x 8' skull & crossbone painted on it, noting your were entering the "Unknown Zone" - did it for the Fed; the report was delivered with all the pertinent info., but somehow that report hit the shredder (several times - over a three year period).

I hope ya have enough Addenda - to secure yer seat, otherwise - get away as quickly as possible B)

h34r:

 

[Wally Jones]

TE,

Good luck.

The opinions on the possible stigma attached to mold run from one extreme to the other. The insurance industry is paying out very big bucks to their legal beagles to get the word out that mold in houses causes no problems whatsoever. There are already court precedences established to back up their position. My wife's sister is assembling some compelling evidence that mold in their home at the very least has contributed to her grandson's brain damage, causing autism-like symptoms.

Working RE magazine had an article on appraisers and mold in their June 2003 issue where they discussed liablility, responsibility and competence.

Hopefully, someone out there has information on the stigma associated with mold and its impact on market value.

For future inspections, if you spot the stuff, be careful.

 

[G-man]

I have done a few REO's with a severe case of mold infestation, one very much like your subject. Newer residence in a nice subdivision of homes in the 170's to 250's. There was about four inches of water in the basement for sometime and a nice haze of mold throughout the home. Nothing like that black mold people talk about and I've seen, but still noticable. I believe I put $130ish on the value of the home and it eventually sold for in the mid $120's. That's about $40 - $65K below market for the area. I've also noted some comparable sales with mold problems also selling significantly lower due to mold. You may want to investigate home sales where mold has been noted and see what the market reaction is.
The last moldy home I did was very severe. Black, nasty mold in the basement and pretty much throughout first floor. Ball park estimates from three mold remediation companies were between $15 - $20K for a 1100 Sq. Ft. home. So the cost to cure alone can be pretty steep. As far as furnaces and duct work are concerned, one of the companies said they recommend a thorough cleaning by professionals, as any mold can be removed from the metal ductwork. If it is that flexible plastic tubing stuff, however, it must be removed/replaced.
Now is also a good time to invest in, at the very least, several good surgical masks to prevent inhalation of nasty stuff in these homes. I know of one appraiser who does not enter a moldy home without a pretty serious looking ventilation mask. Makes him look like Darth Vader. He swears by them as he has pretty severe allergies and doesn't take mold likely. All in a days work I suppose.

 

[xm39hnu]

Some months back, the AI magazine "Valuation" ran an article on appraising stigmatized property. The methodology involved finding similarly stigmatized homes which have sold, maybe in other states. You then find three comps without the stigma in that same area (most similar, proximate, and recent sales) and arrive at a value without the stigma. Subtract the sold property's selling price from the value indicated by the comparables, and reduce it to a percentage. There's comp #1. Do that two more times, with different properties sharing the same stigma. Average the percentages, and you've got a supportable adjustment for stigma. The author noted that his fee for such appraisals ran around $2500, depending on the travel involved.

If you choose to use that methodology, consider locating the sold-stigmatized properties by whatever means, and then hiring an appraiser local to the sale to run down the comps and calculate the stigma percentage for you. List'em as providing "significant professional assistance." Pay their fees yourself, and bill the total through to the client.

This isn't the solution, but it may provide a good starting point.

Call the client and discuss the situation with him. If toxic mold isn't a big problem in your area, then maybe he wants you to appraise estimating simply cost to cure. If so, use an extraordinary assumption that the mold won't stigmatize the property once it's properly cleaned up. Be sure to state a reasonable basis for the assumption. Otherwise, if you think it might stigmatize the property, then use a hypothetical condition as being necessary for analysis according to the client's instructions. Disclose, photograph, disclose; then disclaim, disclaim, disclaim.

 

[Mike Garrett RAA]

Only one case I am familiar with here .... sorta like what you described in the basement. Everything was ripped out and redone. Could not tell there ever was mold in the basement. House sold for about $10,000 below others but I believe that was due to it being an REO rather than the mold issue. The cost to cure was about $8,000 and the sales price was around $110,000.

 

[TEL2002]

Finished talking to a mold remediation expert. His company gives a 5 year 'no more mold' warranty when they finish work. He described the mold in my case as the really bad stuff. Remediation $25-30,000. Could be more or less depending upon how much migration of spores took place. If the humidity level was high in the house, the spores could migrate upstairs then strart growing under the upstairs baseboard trim, etc. He deals with people all over the country - but primarily Ohio.

 

[Jeff Horton]

TE, I have a house in my neighborhood..... no I moved, my old neighborhood, that might help you. I appraised it as an REO and the basement was eat up with mold. Green mold on everything. I was a coustom home and the builder (a contractor) got in financial trouble and ended up being an REO. It eventually sold but I don't remember what for but could find out.

Problem is there is no previous sale to compare it to. But you might be able to get some info from that one.

 

[Don Clark]

B) The leading expert on mold, as far as I am concerned is Jack Schoppa, IFAS who has written a very comprehensive paper on the subject.

He can be reached at:

jack@northtexasproperties.com

or,

http://www.naifa.com/jack

If that does not work just go to www.naifa.com and look him up in the directory.

Don

 

[hal380]

Hi All;

OK Dumb Question Time.

IF remediation has taken place, or is to take place.
AND
IF proper preventative measures are taken

THEN where is the stigma??

There WAS a problem, but there is no more problem and there is a guarantee to that effect. (From the remediation company).

This is not like a house where a murder or suicide took place. In that case you cant "Un-ring the Bell", but here you can.

I understand that there may be market resistance, but with proper documentation, and marketing time, I think there should not be a problem.

I am now donning my asbestos suit

Regards to all


Hal