Owner dragging feet on repairs

[Abigail Helfer]

New to investing, and this will be my first deal.

My husband and I are in contract for a duplex. It is a good deal for us and the home inspection went relatively well. There is only one problem and that is mold in the attic. We had it inspected by a mold specialist who advised that it was a very severe case of mold due to the lack of ventilation in the  attic. He said that it is severe, but easily remediated. He advised that once the ventilation is improved and the mold removed, the issue will be resolved. The owner has agree to fix the problem since it is a health hazard and not something we can buy in this condition ( I don't even think a bank would lend on this)? Nor do we want something with mold.

We were excited that he agreed to fix it, however, he has been dragging his feet getting as estimate of his own and getting repair work done. He is not going with the specialist we found, and wanted to shop around. We had no issue with that.. but we originally went into contract the week in November, and had an estimate done within a few days of finding the issue. It is now March, and he still doesn't have an estimate and no repairs are on the schedule for the near future.

I am curious what our rights are in this situation. We are happy that he will fix it, but shouldn't there be some sort of time line in place for this?  Every month we don't own the place is lost income potential, and the chance for the owner to slack on maintenance. He moved to Hawaii, and I doubt he will be spending much time upkeeping this place, especially because he has a buyer on the line.

What would your advice be on this situation? The tenants do not know about the mold at all, and that  is something else to consider. I am assuming it is not legal to hide something like that from them like he is?

Thank you!

Abby

[Thomas S.]

My advice is that when you made the deal to purchase that was the point when you place a time line for closing.

Inform him now that you are setting a closing date, give him 2 weeks and no more. If the work is not completed and inspected by you at that point you tell him you will close the purchase at a reduced price (cost +) and have the work done yourself.

[Mike Cumbie]

Hi @Abigail Helfer,

Have your agent fix it. There is no reason it has gone on this long. I am surprised the rate locks and all of the financing has not went up in smoke yet. Inked in November and not closed 4 months later? Send in the attack dog!

Good Luck!

[Abigail Helfer]

Thank you for the input, Greg. We did decide on a closing date, but had to extend in order to make this work.

The concern is, I don't want to buy the house in the current condition, and don't want to do the repairs myself because it is a health hazard. I don't want the liability of that.
Even our inspector told us to make sure it was finished by the owner before we buy since it is such a liability.

Also, my local bank does not want to provide a mortgage on a house that has mold of this degree.  

[Abigail Helfer]

Thank you, Mike! I appreciate your response!

[Account Closed]

You should have negotiated the sale price based upon what it would cost YOU to fix the problem. Then YOU fix it. Go back to the owner and renegotiate and if he doesn't agree cancel and move on.

[Abigail Helfer]

Thank you, Tim.

I was warned by both my inspector and the mold specialist to make sure that the owner does the repair work before closing. Since the mold is a safety hazard, the tenants should not even be in the units. There is a lot of liabilty involved in it.

For any other repair work, I would have renegotiated the price and would have done the work- but mold seems to be a trickier situation.

[Thomas S.]

What is now you new closing date. It's time to put his feet to the fire or walk away.

By the way your inspector and agent gave you poor advice. You should have negotiated a lower price and had the work done yourself. If you did it would have been completed last November and you would have had it done right.

Your concerns are unfounded when dealing with professionals. I would now go that route. Drop the purchase price considerably (minimum 1.5X the cost to remediate) and get moving.

[Christopher Phillips]

@Abigail Helfer

I agree with @Account Closed

In general, you are supposed to renegotiate purchase price instead of asking for repairs. You renegotiate based on quotes from contractors, and then hire contractors to do it or do it yourself after close. If you have an owner do it, they will do it as cheaply as possible and not necessarily up to your standards. You also risk pushing the closing date, which can cost you money if the rates are moving up.

Obviously it needs to be addressed, but not closing is costing you while rates rise and you aren't collecting rent money.

In business, time is money.

[Abigail Helfer]

Yes, I understand that renegotiating is the normal procedure.

But in this case, we would have to do the work before we even close because the bank will not give us the loan with the mold?

The repairs are going to be around $12,000 and will take about 2 weeks time. We would also need to cover hotel costs for the tenants. That is a lot of capital up front.

[Stephen Flynt]

Originally posted by @Abigail Helfer:

Yes, I understand that renegotiating is the normal procedure.

But in this case, we would have to do the work before we even close because the bank will not give us the loan with the mold?

The repairs are going to be around $12,000 and will take about 2 weeks time. We would also need to cover hotel costs for the tenants. That is a lot of capital up front.

I'm curious, how does the bank know about the mold in the attic?  Is it on the appraisal report?  Obviously it's on the inspection report but I've never known of an inspection report being sent to the bank.

[David Faulkner]

This is my opinion, but by and large I find that when you bring in a "mold specialist" they blow things way out of proportion. I have had or seen this kind of inspection many times, and literally 100% of the time they find mold, and every time say it is a very serious issue. Of course, they are in the business of mold abatement, so of course it is always a serious issue that should be addressed right away, LOL. There is literally mold everywhere all around us at all times. If you eat cheese you are eating mold. Most of the time it is a simple fix ... add some ventilation, use some bleach, at worst fix a leak and replace some drywall. Unless you can see black mold in plain sight, can smell it everywhere, and the toxicology report confirms it is toxic mold, I would take such reports with a big grain of salt. In your case, if the owner already agreed and has not remedied, I'd get him to agree to a reasonable price reduction in lieu of fixing it and take care of it yourself after closing.

[Abigail Helfer]

Thank you for your opinion, David. Yes, I understand your point about the mold, and feel the same way as you.

But this case is very severe- the entire attic is covered in black mold- it can be seen and smelled. The walls are completed covered at this point.

We are talking to the owner about renegoiating a price, but we will need to talk to our bank as well since the mold is so severe. I am not sure that it will be able to be financed in the current condition.

[Bryan O.]

@Abigail Helfer walk away. The owner is not doing what he needs to. You are not doing what you need to in terms of getting a contract, dates, and keeping him accountable. You are also afraid of liability which should realistically fall to the professional who signed off on the remediation, not you. You also do not have the capital to do this without the owner. For a first deal I think you are stretched too much out of your capabilities in too many areas. I would recommend moving on and finding the next deal that is a little closer to fitting your needs and abilities today.