You already know that buying foreclosures is a serious business. You have your money, your time and sometimes your financial future at risk with certain deals. One thing that you may overlook as you are searching for the right properties are the serious health risks that many distressed properties have.
When a homeowner is facing foreclosure, common maintenance issues are postponed, delayed and most times simply ignored. If the lender repossesses the home, they have even less interest in maintaining the home and most often offer the property as an “as-is” sale. While these issues help create some of the significant opportunities you will see in buying foreclosures, if you are not careful, these can also give you headaches, both form the actual issue, and form the stress involved making the property safe to sell.
While there are plenty of issues that can creep up, here are the top 3 health hazards you want to know before you buy that distressed property.
Asbestos
When you are buying a foreclosure and the property is an older home, you should always check for asbestos. Asbestos is a great insulator and it was commonly used for the boilers, the insulation of pipes and even exterior shingles. The problem with asbestos is once it becomes airborne those fibers can get into your lungs and are known carcinogens. No one can stop you from removing the insulation on your own, but proper disposal is a must and failure to do so can result in significant municipal penalties. We recommend a licensed professional handle both the removal and disposal of asbestos.
The mere presence of asbestos does not mean that your health is in danger or you should not invest in that property. If the asbestos is tightly wrapped and encapsulated, you would be best off leaving it alone. Just be aware if you start to notice some of the white wrap around those pipes in the basement fraying, you will have to address that issue when a traditional lender appraises the property and notes the issue. A traditional lender will not lend on the property in this instance, and if you are planning on a flip, or need a lender to approve your deal, this will hold you back every single time. Make note if you see asbestos and make sure you factor in for proper disposal in all your estimates.
Lead Paint
Any home that was built prior to 1979 probably has had lead paint on the walls at one time or another. Lead paint has been found to cause brain damage in children who have eaten the paint chips as they have fallen off the walls. In New York, some landlords have been on the receiving end of multi-million dollar lawsuits for failing to do simple maintenance that would have avoided any issues.
If the foreclosure you are buying was built earlier than 1979 and it has chipped or peeling paint, a fresh coat of paint will cover whatever remnants may remain. This simple fix will give you long term peace of mind.
If you are flipping a home, keep in mind, if your end buyer is getting a traditional loan, there lender may require that all paint is covered as well, even if the chipped paint is on the exterior of the home! I know that may sound crazy, after all, who would eat paint chips from the exterior of the home, but rest assured, your traditional lender is looking at the absolute worst case scenario. By being prepared, you can make the necessary adjustments in your offer or prepare to remedy the situation beforehand.
Exterior lead paint
Mold
Mold is an issue that can affect any home, new or old. When water gets in to a basement, slides behind a wall or leaks in from a window sill, you have the potential for mold to grow. Black mold can lead to respiratory diseases and cause long lasting effects. The best defense for this is to remediate the affected area but most importantly find out what the root cause of the problem is. I have seen many “investors” try to take the cheap way out with mold killing sprays, but inevitably, when the water comes in again the mold will grow. Mold is a symptom; the problem is the water flowing into the property. Make sure that you address that issue immediately and keep a small problem from becoming a large one.
None of these issues alone should make you step away from any property. In fact, knowing how to address them might actually give you the opportunity to get a fantastic deal on that distressed property you were looking to buy. The key is spotting these issues before you make your offer and negotiating clauses to protect you before you buy your foreclosures, this way you have already budgeted in your repair and are able to profit from your investment.