If you're just sitting down to eat -- and who doesn't eat in front of their computer nowadays? -- you might not want to read this right now. But do come back after you're finished because this is an interesting story about a Sacramento bank-owned home and the horrors lurking in our residential real estate market.
Perhaps what I find disturbing is some not-so-lucky first-time home buyers may end up with a disastrous home, either through buying this flipper from an investor who doesn't hire a mold remediation company or by thinking they can tackle the project by themselves. When a home has extensive mold, you can't just cut out the drywall or plaster. Mold should be removed by mold specialists because mold spores can settle all over the house. A byproduct of toxic mold is mycotoxins, which is believed to be dangerous to even healthy people.
Here is a photograph of mold and fungi my client and I discovered growing in a bank-owned home near Curtis Park. It is located in a back bedroom and in a closet, caused by water leakage from the roof. You notice it when you enter the room because it smells to high heaven.
Not only is the roof defective, but the back bathroom flooded upon inspection. The contractor who inspected the home said the sheathing in the home's addition was wet, and she could hear water running in the walls, even after she turned off the water to the house.
We were not aware of the extent of the damage, of course, when we won the winning offer. Within days of going on the market, the listing agent received a ton of offers. It was priced way below market, so many first-time home buyers -- hoping to buy this with FHA financing -- were fighting each other through multiple offers.
My buyer offered all cash and to close within 14 days, but because of the multiple-offer situation, she settled on a price about $80,000 higher than list.
The bank gave us a termite report that showed no termites and about $4,000 worth of dryrot on Section 1. I called my preferred pest inspector, whom I often use as a back-up to mediocre pest reports. He found $21,000 worth of dryrot, plus drywood termites in the eaves. See, it often pays to get a second pest inspection.
However, both the contractor and pest inspector recommended that the back half of the house be torn down and rebuilt. It seems that the previous owners had built an addition over an existing rotting porch and steps, which made access to the wet sheathing impossible.
My buyer submitted a counter offer to the bank, asking for a $50,000 price reduction to cover the unexpected expenses. The offer contained a clause that said if the bank refused to respond in writing within a specified time period, she would cancel. We put the shoe on the other foot. I asked the listing agent to tell me which the bank preferred: a release of all contingencies or a cancellation. We also submitted our discoveries.
In the end, the bank verbally offered a $20,000 price reduction. The buyer canceled. I tried to console the buyer, saying she will undoubtedly find another property to fix up, but the buyer seemed more concerned that I would be "discouraged" with her. Honestly, if the property isn't right for some reason, I prefer that buyers walk away. I want my clients for life.
But this situation does make me wonder: Will the bank submit our discoveries to the next buyer? Maybe, maybe not. By law, California sellers are required to disclose all material facts, but banks don't always follow the letter of the law. If an investor buys this to fix up and flip, will that investor ante up thousands to hire a mold remediation company? Will the investor repair the water damage according to code or cut corners by leaving wet sheathing under the stucco? Maybe, maybe not. When you buy a Sacramento bank-owned home or a flipper, you are taking a risk. Please be careful out there and get those inspections before buying.
The Short Sale Savior, by Elizabeth Weintraub, coming in June 2009.
Photo: Mold and fungi in Sacramento bank-owned home. Elizabeth Weintraub.
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Certified HAFA Specialist
My Sacramento Real Estate Listings
Elizabeth Weintraub is an author, home buying columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout the four-county Sacramento area. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. Broker-Associate at Lyon Real Estate. DRE License # 00697006.
The Short Sale Savior, by Elizabeth Weintraub, available at Amazon.com.
Lyon Real Estate is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan.
Photo: Unless otherwise noted in this blog, the photo is copyrighted by Big Stock Photo and used with permission.
The views expressed herein are Weintraub's personal views and do not reflect the views of Lyon Real Estate.
Disclaimer: If this post contains a listing, information is deemed reliable as of the date it was written. After that date, the listing may be sold, listed by another brokerage, canceled, pending or taken temporarily off the market, and the price could change without notice. It could blow up, explode or vanish. To find out the present status of any listing, please go to elizabethweintraub.com.
