Mold - How to deal with it in report

[Woodworker]

I am doing an REO appraisal in an upscale neighborhood. The house itself is in good condition except minor cosmetic items. The big problem is that it has mold. The homeowner met me at the house and showed me a petri dish that she left in the basement to have tests done and there did appear to be mold in it, though I am not an expert. She explained that they paid $100K to have the mold taken care of but they are still having problems with it growing back and they are having health issues. Fortunately she warned me ahead of time and I had a mask on.

My question is: How do I determine an "as-is" value for this house? I cannot find any other sales of homes with known mold issues, at least not in an upscale house such as this. Do I use typical comps and make an adjustment for condition? If so, how do I determine a proper adjustment?

Any help on this would be greatly appreciated. If I missed some important information I apologize. I can provide more info if needed.

 

[The Bob]

That's a tuff one. I think you will need to expand your search to find sales affected with mold, even if its to another state. I think the AI site has an area where you can share sales info with other appraisers across the country. Also found this article....


http://www.accesskansas.org/kcaa/reports/mold2.htm

 

[ghrousseau]

I am doing an REO appraisal in an upscale neighborhood. The house itself is in good condition except minor cosmetic items. The big problem is that it has mold. The homeowner met me at the house and showed me a petri dish that she left in the basement to have tests done and there did appear to be mold in it, though I am not an expert. She explained that they paid $100K to have the mold taken care of but they are still having problems with it growing back and they are having health issues. Fortunately she warned me ahead of time and I had a mask on.

My question is: How do I determine an "as-is" value for this house? I cannot find any other sales of homes with known mold issues, at least not in an upscale house such as this. Do I use typical comps and make an adjustment for condition? If so, how do I determine a proper adjustment?

Any help on this would be greatly appreciated. If I missed some important information I apologize. I can provide more info if needed.

I would do some research on this topic. You will find that in some cases the condition could not be remediated There have also been cases where multi-million dollar lawsuits have been filed and the plaintiffs have won in court because they bought a home with mold issues that were not adequately disclosed. There are also cases where large expensive properties were actually demolished because the mold issue could not be cured. I think you actually need to have an environmental inspection done by a mold remediation company to determine cost to cure. There is also likely a stigma attached now to the property because the mold issue will have to be disclosed for any contract of sale and it will have a negative impact on buyers.

 

[rbrienza]

Sounds like you need to get a letter form the mold people what was done etc... this may follow in USPAP AO-9....

 

[Smokey Bear]

Get Randall Bell's "Real Estate Damages: An Analysis of Detrimental Conditions." Mold houses can be tear downs if they're not able to remediate. Also have to consider the stigma and risk involved in buying a house that's had mold. It could come back. This is a complex assignment.

 

[Mztk1]

It is a pre-foreclosure/REO and you met the owner. She may be trying to strike a deal with the bank. I'd be skeptical.

Mold can be a nasty problem, no doubt, but it is also ubiquitous and most often it can be remedied with a dehumdifier, sunlight, a bucket of water with bleach and scrubbing.

If the mold is severe the lender is not going to be able to sell the house until it is remedied any way, and the lender is going to have to have a professional inspection no matter what.

I would simply state what the owner told you and you saw in a petri dish as opposed to on a wall or floor, write the report making the extraordinary assumption that the mold problem is minor (mold is everywhere and spores are too), can be easily remedied, and has no effect on value. Then CB4 the report subject to a qualified, professional inspection with the added statement that if the professional findings are contrary to your assumption your appraised value is void.

If the mold is confirmed, finding mold houses is usually not hard in the MLS because HUD homes that have traces of mold have to be advertised that way. I have 1160 mold house sales in my MLS in the past year and 1978 listings/pendings right now.

 

[Woodworker]

Thanks a lot for the fast replies! Jim, since I didn't see any mold myself (I think I know what to look for but not positive) I did as you said. I made the appraisal contingent on an inspection. That made it a whole lot easier than what I was originally thinking. I believe that since I did not actually see any that this should be a reasonable way to handle it. As you stated, the owner could be trying to swindle me.

 

[timd354]

As you stated, the owner could be trying to swindle me.

That is a very good possibility....set out a petri dish anywhere with a little sugar or a small piece of bread in it and you will almost assuredly get mold in it within a few days unless you are in a very, very dry place, such as the middle of the dessert.

 

[Ross (CO)]

Have you contacted your E&O provider to ask their guidance on the potential of a mold-related appraisal situation ? Do you have their extra mold-and-environmental coverage ? Have somebody else make the definitive declaration to your client that "mold" exists in and at this property and offer to them a measure of the magnitude and quantity of this possible condition. Your client SHOULD want THAT first, anyway......then they can pursue an appraisal with that information in-hand. Have that professional's report shared with YOU and a copy kept then for your workfile.

Use this interim time period to seek any marketplace data that supports your efforts and helps to qualify this property's value impact based on such occurances with similar sales in that market. What has been explained to you as the source of the water which brings on the possible mold ? A flood, broken water heater, leaking roof, bad site drainage and cracks in foundation ? Begin the process of developing your assignment engagement order with this client and know the fee that YOU feel compliments the totality of work to be done and the liability that lurks in the musty, fuzzy inner walls of this place where people live, sleep and eat.

Consider teaming up with another experienced appraiser who has handled some reports of these pathological nightmares before and split the hefty fee with them.