Buying a Property with Mold in it

[Danny Duran]

BP community--I went under contract on a north side Chicago multifamily property (4-flat) this week (thanks @Brie Schmidt  ). Basic inspection (thanks @George Foster ) and mold inspection occurred on Wednesday. There was mold found in several places. Not just in typical moist areas like bathrooms--but in the corners of closets, under sinks, under a staircase and around garden unit windows and some walls. 

The mold inspection results, which include air analysis for airborne mold, won't be ready until 9/30/14.

The inspector wasn't too worried about the garden unit mold because it's common in basements. A dehumidifier is a must there and would prevent future mold from forming (after the current mold is re-mediated). The under-staircase, under-sink, closet corner, was of concern. If remediation is required, I would need to hire a special team to seal off mold areas of the units with plastic and execute the removal. 

I've never had to deal with mold in a building, let alone one I may purchase. I'm looking for guidance from the BP community on mold issues, what I need to know, and what to consider if I decide to move forward with the purchase. I plan to rehab these out of date units and can't risk kicking up mold and spreading it around the property. Does anyone have stories (good or bad) to share about mold issues in properties?

My first thought is to go on Angie's List for remediation providers. However, I want to crowdsource from the Chicago BP community as well. Please recommend mold remediation companies that did a good job for you. 

Another note, this property is sold "as-is." I need to quantify the re-mediation costs so I can request a justifiable credit from the seller. You're insight is greatly appreciated!

[Bob E.]

Is the building properly sealed?  Seems like maybe you have some issues with moisture getting into the building.  I would check that out, along with a fix, as the first priority.

I would recommend getting on you tube and goggling mold remediation and see what is involved.  I think a lot of these companies oversell the solution.

[Joey Nakayama]

@Danny Duran Congrats on your first contract!

@Steven Hamilton II haven't you successfully dealt with a pretty serious mold issue on a rehab?

[Joey Nakayama]

@Steven Hamilton II tag didn't work on my last post for some reason

[Damian Baynes]

Mold remediation can be expensive! It's hard to give you any type of ballpark figure because it depends on how bad the mold issue is. It's a very involved process. The remediation team will have to knock down walls as well to see if there is mold behind the walls, they will have to fix the source of the problem and remove the existing mold as well as spray solution to prevent further growth. Not sure what your renovation budget is but this is something that would eat up contingency funds off the bat. I personally would not go forward with it but that's just me. Interesting in hearing what other members think. Good luck either way.

[Bob E.]

Several of these look like minor issues.  Under the sink?  Fix the leak!   Next to the window?  Seal/replace the window!  

I would use this to 1st, find out why water is getting into the building and what it will take to fix the problem and 2)  use that to negotiate the price down.  You might have to replace some sheetrock to remediate the problem but it doesn't look that bad to me.

[John D.]

@Bob E.  Well said.

  Fix the problem, remove the sheetrock (or whatever surface the mold is on), assuming no mold behind it, replace the sheetrock.

  If there's mold on a bit of framing consider replacing, or if it's not bad bleach+water or a mold product, then I typically use killz over that after it's dried (probably overkill).

  If it's extensive, it's a whole different story, but for specific areas where you have identified and stopped the problem, typically pretty straightforward.  Probably best to clearly identify if there is specific, local problems (like leaks) or if there is some larger issue at hand.

[Travis West]

@Danny Duran and others here.

Everyone who invests in residential or light commercial real estate should have a copy of this document on their computer, iPad, or similar digital device.

This makes a quick read and explains the hazards and pitfalls of remediation. It also provides some common sense solutions to resolving mold on construction materials. 

• There are many solutions that you can do yourself.
• There are some that you never want to do yourself.

The EPA guidance on mold issues is here:  http://epa.gov/mold/moldguide.html

The digital copy of the same information is here: http://epa.gov/mold/pdfs/moldguide.pdf

This document does not help you estimate costs for repairs, but does help you see through the "smoke screen" that many remediation companies will put up when talking about mold in homes.

In spite of what John D. recommended in his response above, the use of a chemical or biocide that kills organisms such as mold (chlorine bleach, for example) is not recommended as a routine practice during mold cleanup.  This is because "a dead mold is just as harmful to the hypersensitive as a live mold!"  Why you may ask is that?  Well, the mold hyphal matter (the spores/seeds, branches, etc.) have the allergen in their proteins.  Killing mold does not inactivate the proteins.  I can cite numerous instances where killing mold in an area occupied by hypersensitive people did NOT stop their symptoms.  That's because they were still breathing in the (now dead) hyphal matter and said matter contains the proteins that they were reacting to.  So they keep on reacting to the molds (dead or alive)!

Rather, remediation (as in removal of mold-contaminated materials) is the way to go.  In the case of structural wood (studs, sill plates, headers, wood framing, etc.) that has mold, it is best to HEPA vacuum, then wipe with a solution of mild soap (dish soap) and water.  Allow it to dry then revacuum the surface.  If there is discoloration in the wood pores then you can do a light sanding, HEPA vacuum, wipe with the soap/water solution, allow to dry and HEPA vacuum again.  Light sanding does not impact the structural integrity of structural wood.

Following that, a treatment with Kilz or Fosters encapsulating paint on the structural wood is OK as that will ensure that any hyphal matter that you missed does not become further airborne.

Mold investigations and remediation are a science.  But there is lots that investors can do to reduce their costs - and their ultimate exposure.  The downside is ...

If you do it wrong, you now have a much greater exposure than you ever want!

Download the document and read it thoroughly.  
That should give you the knowledge that you need to deal with mold.

Travis West, CIEC, MAC0325

1. CIEC - Certified Indoor Environmental Consultant, American Council of Accredited Certifications
2. MAC0325 - State-licensed Mold Assessment Consultant, Texas Department of State Health Services

[Steven Hamilton II]

Travis put that perfectly. I personally love properties with mold. However, I have a great deal of experience in remediation.

@Danny Duran , You need to investigate how extensive those problems are to know how bad its going to be. If it is on the surface, it could be as simple as removing the material and replace that. If it is a widespread area, you need to know the source of the moisture as well.  Common areas are one thing and have an obvious primary cause.

[Brie Schmidt]

@Steven Hamilton II - this property is local to us.  Can you recommend a mold remediation company that you have experience with?

[Darrell Shepherd]

I don't worry about mold too much, but we don't have the bad stuff around here.  Like has been said a lot of times those mold remediation companies over sell the stuff.  They'll go in with Hazmat suits and bubble wrap the whole house if they think you'll pay for it.

You do need to make sure the city isn't going to make you do crazy stuff, though.

I use it as a negotiating tool when I'm buying, but its not too much trouble.  I'm pretty much with John, first thing you gotta do is find the water source and dry the place out.  I give my guys respirators and pull all the sheetrock down, then hit it with bleach.  Hydrogen Peroxide works better on wood because it soaks in and goes after the deep stuff.  Wipe it away good and and then kilz it.  

That wood in the pics looks pretty bad, you may want to replace it or smoke it, but really, if you kill the mold with hydrogen peroxide and then seal it with come Kilz you shouldn't have any problems.

[Steven Hamilton II]

Originally posted by @Brie Schmidt:

@Steven Hamilton II - this property is local to us.  Can you recommend a mold remediation company that you have experience with?

 You're talking to someone who has always handled it directly. I have never outsourced it.  I'd be happy to take a look at the project and advise on it.

[Brie Schmidt]

@Steven Hamilton II or any other mold expert, please help!  @Danny Duran  did a mold test for this house and we got the report back but are not totally sure how to interpret it. They did air samples; here is what was found per sq meter in the highest concentration:

Basidiospores - 312

Cladosporium - 429

Curvularia - 13

Penicillium/Aspergillus- 624

Rusts - 169

Smuts/Periconia/Myxomy - 13

Stachybotrys - 793

How worried should we be?

[Danny Duran]

Thanks to everyone who has commented so far! @Brie Schmidt  pulled those numbers from the mold inspection report found here: https://drive.google.com/file/d/0BySbvdlebHlhYkVGd...

Here are screen shots of the relevant pages:

I'm worried about the stachybotrys density. The inspector told me that the density in the 1st floor kitchen is of concern. I plan to renovate all floors of this 4-flat. My research tells me that it's critical to remediate mold prior to renovation so that you don't kick up the mold spores and cause them to spread around the property. I would really appreciate BP community input. Thanks, all!

[Derek Martin]

Congratulations @Danny Duran 

We once had a contractor recommend Rainbow International (http://www.rainbowintl.com/orlandpark). They have an office in Orland Park. I can't comment on their work or pricing as I've never used them. But figured I'd pass along the name. Good luck!

[Danny Duran]

@Derek Martin thanks for the suggestion. I found my remediation companies on Angie's List. I'm having them walk through the property on Friday to get me estimates for the work. I'm going to be posting an update soon on where this stands. Lots of drama. Stay tuned!

Thanks everyone for your input on this topic so far! @Travis West what's your opinion of the mold inspection report? I've spoken with a number of remediators about it and they all say there's an alarming amount of Stachybotrys in the air.

[Danny Duran]

BP Community—after talking with mold experts we have found that airborne Stachybotrys is rare (usually not airborne unless disturbed) and that even an airborne spore count of 1 will fail a test. The air test detected 61 spores in the sample, comprising 65% of the spores counted. The seller's agent told @Brie Schmidt  today that the seller is fine with granting access for remediation companies to conduct walk-throughs and make estimates; however, he is unwilling to grant a credit to me for any such remediation work and will back out of the deal if it is requested.

• What are the landlord-tenant laws in Chicago related to mold disclosure to tenants and remediation requirements?
• Now that the current owner has documented evidence (my attorney sent the seller’s attorney the mold inspection report) of mold in the property, does he need to disclose to his tenants?
• Does the owner need to pay to have the issue professionally remediated for tenant well-being?

@Brie Schmidt  (being the rock star that she is!) communicated with the Chicago Metropolitan Tenant Organization, the Community Investment Corporation, and the Chicago Department of Public Health (CDPH). The CDPH informed that the tenants may sue the landlord (or me if I acquire the property) for negligence if he has knowledge and no remediation action is taken. Currently, the tenants are not aware that they are living in a toxic environment (1st floor unit only).

If Brie and I inform them and they sue the landlord, would the current owner have cause to sue me for the resulting economic hardship? Brie’s contact at the CDPH is concerned about this risk and is investigating it.

@Brie Schmidt 's concerns:

• Were this deal to fall out of contract, it’s doubtful the seller will inform the tenants, knowingly exposing them to harmful mold. We think there is a moral obligation for us to notify the tenants no matter what happens.
• If I do close on the property and the tenants in the 1st floor unit are still occupying it, even if I give them 30 days notice to vacate (they are M/M), they’ll be living in that toxic environment under my ownership. Between a rock and a hard place: If I do not disclose it to the tenants, I may be sued for negligence. If I disclose, I’ll likely be obligated to put them up elsewhere for the 30 day period until the mold is remediated. Of course, disclosure is the right and moral thing to do.

At the beginning of this post, I mention that the seller will not give a credit to me for remediation work. At this time, I have no idea what it’ll cost to remediate this property so I don’t know if I can absorb it. I’m going to proceed with a walk-through to generate remediation estimates (occurs on 10/3/14). Once I get the estimates back I will need factor that in to the other costs I’ll be faced with (this property is sold as-is).

@Brie Schmidt and I assess that the seller is naïve to the seriousness of this mold issue (legal, health, etc.) and the financial implications of professional remediation. The plan is to inform the seller of the costs as well as the requirements to disclose the presence of mold if reactivated on the MLS. Mold turns many buyers away as mentioned in this article, http://www.biggerpockets.com/renewsblog/2008/02/15/a-mothers-nature-a-force-to-reckon-with-when-it-comes-to-mold-and-the-home/, shrinking the pool of buyers to a small set of investors who will want a smoking deal on the property. If he decides to kill the contract with me and re-list, he’s going to wait a long time for the investor who is undaunted by the mold disclosure to make what will be a low ball offer. While he waits to get under contract again, he will knowingly expose his tenants to toxic mold and risk a negligence law suit (if he doesn’t pay to remediate the issue). The seller’s agent claims that the seller is highly motivated due to some medical reasons, so, dragging this out with the drama mentioned above seems unbearable. The seller needs to “wallow in his own sweat” to understand the adversity ahead. @Brie Schmidt  and I intend to help him do just that.

What would you do in this scenario? Please comment and offer guidance as we are trying to evaluate from various angles to establish a power position in the negotiation. Thanks!

@Joshua Dorkin , would you please suggest some people who can weigh in on this topic?

[Andrew Syrios]

Mold is not that big of a problem IF you can find where it's coming from. All you have to do is remove the affected areas and replace them. The key is figuring out where the water came from. Is it a roof leak, plumbing leak, one time overflow, basement leak (from say cracks in the foundation or a high water table, etc.). So the key here is to find out where the mold is coming from and then proceed from there. (Personally, I kind of like mold, because it scares a lot of people off but is often easy to fix, so it can be a great negotiating tool.)

[John Weidner]

I would find another deal. 

[Brie Schmidt]

@John Weidner - we are defiantly considering that.  My main concern is the current tenants.  The Chicago Dept of Public Health told me that they get calls all the time about black mold, but nobody has ever done a test and found it active and airborne.  Danny and I both feel the tenants should know, but currently I can't find anything that requires the landlord to disclose to his tenants, only prospective buyers

[Travis West]

@Danny Duran 

I was finally able to find time to review the report and I can offer following opinion.

Finding airborne Stachybotrys molds is very unusual.  I am assuming that the space is unoccupied and consequently, there is no one in there to "stir up" the spores.  Hence, my concern that finding this mold airborne it is very unusual.

Possible Sources
It is possible that the moisture is from outside air leaking in ... and if there is a gap/opening in a perimeter wall or window, then that could create the airflow that would cause this mold to become airborne.  It  could also be the reason that the moisture is there.  Water often comes into a building in the form of water vapor. When that vapor comes in contact with a cooler surface, then condensation can occur. Over long periods of time, that kind of condensation (water) will certainly support the growth of mold.  But that's all based on an uneducated assumption (since I haven't been at the building).

Managing the Remediation
The engineer in me says, "Heck! I can always create engineering controls (containment, airflow, air scrubbing, dehumidification) and strategies to manage mold without it escaping during remediation."  There is always a way ... but most of those strategies need to be designed and completed by experienced people/companies.  And from what I've read from some of the folks in this thread, many of the investors here don't trust remediation companies.  

IMHO
Given that some won't trust a remediation company then I'd echo what @John Weidner  said above ... Find another deal!

I think you want to handle this in one of three ways:

1) Hire a consulting professional to manage the project and have a qualified remediation company do the work.  Follow their guidance and if they screw up, let their insurance pay you for their mistakes.  Or,

2) Do it yourself and take your chances.  Just make sure that you've purchased the property using a legal entity that can't expose your other business and personal assets.  Or,

3) Move on to another deal.

While I don't personally feel that Stachybotrys is all that bad (not worse than many other molds) the fact that it is there and that people can get scared or litigious when they hear that kind of mold referenced, makes me want to ONLY consider options 1 or 3 above.  

Simply put, you'd be CRAZY to want to do it yourself!

Too much risk!

Travis

[Christopher Malone]

I do not have experience and i haven't closed my first deal yet, and I may be wrong. I read about this and I think that either way the current landlord is in violation of the Implied Warranty of Habitability. I do not think the landlord would have any grounds to press charges for the disclosure of an unsafe or unsanitary living space that is unfit for human occupancy. I think that if it is not disclosed, not only is the landlord liable for any damages from the defective conditions, but anyone who is aware of it and did not properly disclose the defective condition to the tenants could be as well. 

Once again, I am not a legal expert and this is an advanced discussion, but I thought i would help out anyway i could. I hope this is helpful...  

[Andy Kaye]

The dangers of mold are greatly exaggerated by personal injury lawyers and mold remediation companies. Mold is everywhere and you and I are breathing in millions of spores every minute. 

As long as the moldy area is less than 5ft by 5ft, you just replace the moldy drywall and replace the framing if it is so moldy that it is rotten. Like someone said above, if the framing is just a little moldy, just scrub it off with Moldex and seal it with Kilz. Whats important is that you find and fix the leak that was causing the mold in the first place. Otherwise the mold will eventually come back.

If you hire a professional mold remediation company, all they do is replace drywall and spray Moldex everywhere. Then they use HEPA air scrubbers so that when they take an air sample of your room, it will show a lower concentration of mold spores than before.

[Brie Schmidt]

@Travis West  - You seemed very well versed in this.  I am the agent on this deal and it has taken a very ugly turn this evening.  @Danny Duran is the buyer and we had scheduled mold remediation guys to come tomorrow.  The Stachy airborne spore count was 61 and it accounted for 65% of the sample with an occupied apartment including children.  The listing agent notified us tonight that if any equipment was used during the bid tomorrow would "scare" the tenants the deal was dead.  We told her the guy was required to wear a mask because of the positive airborne test for Stachy - her response was that "the sample could have come from anywhere and that it was probably not from the building but from somewhere else and that if there really was toxic mold people would be dead."  

[Brie Schmidt]

@Christopher Malone I wanted to tag you too as you seem to have experience with this but I think I maxed out my tags previously 

[Christopher Malone]

@Brie Schmidt  Thank you, I will be following this issue until the end. Please keep us updated.