Can a Bank Sell a House With Black Mold

Spring has sprung and as temperatures rise, so do the temperatures in VACANT homes that are closed up and listed for sale. The presence of a water source, warm temperatures and stagnant air make perfect conditions for the quick growth of mold. With that said, AmeriFirst Home Mortgage is sharing some "insider information" with our readers.

Below is the AmeriFirst Home Mortgage Mold Policy for when home buyers are considering a renovation loan and the need for remediation or the abatement of MOLD is warranted. This is not a legally binding document. It's a set of guidelines for our mortgage consultants. However, it's full of great information for home buyers who fund a house where mold is present.

Before we get to the nuts and bolts, check out the video below. You'll explore a house that's quite the nightmare with mold. As you'll hear the expert tell you, even with mold this bad there are things you can do get rid of it - but it's going to be a huge project. So hope may not be lost when there's mold (but sometimes it might be best to move on to the next house, too).

See the embedded video here - Mold Remediation Inspection: How Bad is Too Bad?

FHA 203k Streamline Guidelines for mold:

The Streamline 203k program was created as an offering for limited and uncomplicated rehabilitation to a home. With this spirit in mind, here are AmeriFirst's Guidelines for mold on this program:

♦   Mold cannot be considered "excessive" – see notes below
♦   Contractor to add a narrative to the bid specifically addressing the following:
                Must identify the source of the moisture and/or area of infiltration.
                Must be specific and detailed as to the exact work that will be performed to remove                      the mold.
                Must state that the proposed treatment will remedy the mold problem.
♦  Removal and clean-up of mold cannot displace the borrower for more than 30 days.  A statement must be added to the Home Owner Contractor Agreement stating that "mold will be removed and house will be habitable within 30 days of closing".
♦  If the jurisdiction that the property is in requires specific licensing for mold contractors, a copy of the appropriate license will need to be included in the file.

FHA 203k Full Guidelines for mold:

1. This program allows for excessive mold removal and clean up.
2. The HUD Consultant will be relied on for their expertise and guidance on mold remediation including whether or not the use of a contractor that specializes in mold removal is required for the project.
3. If the jurisdiction that the property is in requires specific licensing for mold contractors, a copy of the appropriate license will need to be included in the file.

Fannie Mae HomePath Renovation:

1. This program allows for mold removal and clean up.
2. If the mold is not excessive, Contractor to add a narrative to the bid specifically addressing the following:
1. Must identify the source of the moisture and/or area of infiltration.
2. Must be specific and detailed as to the exact work that will be performed to remove the mold.
3. Must state that the proposed treatment will remedy the mold problem.
3. If mold is determined to be excessive, then a contractor that specializes in mold removal will be required for the project.
4. If the jurisdiction that the property is in requires specific licensing for mold contractors, a copy of the appropriate license will need to be included in the file.

Notes:

"Excessive Mold" – Determining whether or not mold is excessive can be subjective, open to interpretation and often times will require a "common sense" approach.  The following guidelines will be used in determining what is excessive.

1. Mold that appears to be a considerable health hazard – this increases AmeriFirst's potential liability exposure and can put the borrower(s) and their family at risk health wise.
2. The bid or proposal for the mold remediation is in excess of $1000.

The use of a home inspection with photographs and commentary and/or the use of a HUD Consultant acting in the capacity of an inspector in performing a property review to determine the requirements for the property to meet HUD Minimum Property Standards can be helpful in the determination process of the extent of the mold when this is in question. It is wise to have them break out the mold clean-up to be completed and provide photos for review prior to ordering the appraisal so the full extent of the mold issue is known.

Where practical, mold clean up should be completed as one of the first renovation items.  Should additional mold be found, such as behind the walls that could not be seen from the initial visual inspection, monies would more likely be available to complete this health and safety item either out of the contingency fund and/or could replace a possible elective item should cost of removal become excessive.

Best Practices on Mold Bids

In order to ensure clarity of the actual cost of mold removal and clean up, the bid for the mold removal should be broken down specifically to only include the cost of mold removal and clean up.

For example…

A vacant, foreclosed property has the electric off.  Water backs up in the basement due to the sump pump not being operable as there is no electric. Excess water soaks basement carpeting and the first foot of the drywall creating a mold issue.

The mold bid should include the following mold specific removal items:

• Cost of removal of carpeting.
• Cost of removing drywall to chair rail height.
• Cost of any specific treatment to disinfect or sanitize the affected area to complete the mold removal and clean up.

The mold bid should not include the following as these items are not related to mold removal and clean up:

• Cost of carpet replacement.
• Cost of drywall replacement.

We hope this provides additional clarification on how AmeriFirst Home Mortgage handles mold in homes our clients consider purchasing and fixing up. Due to the potential complexities sometimes related to mold remediation, it can sometimes be a confusing topic. Consult with your mortgage consultant on your particular situation.

Author bio: Joseph P. Daly is the Director of Renovation Lending for AmeriFirst Home Mortgage. A native to the Dayton/Cincinnati area, Joe promotes and educates his fellow AmeriFirst loan officers, REALTORS®, and real estate agents across the country on the full benefits of renovation mortgages in today's challenging real estate market. Joe is considered to be one of the top "subject matter experts" in the country when it comes to the FHA 203k, HomeStyle and HomePath Renovation mortgage products.

(photos taken from EPA "Mold Course")

Can a Bank Sell a House With Black Mold

Source: https://www.amerifirst.com/amerifirst-blog/bid/105888/what-happens-when-the-home-you-want-to-buy-has-mold

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