I bought a house at auction that has mold. What would you do?

Buying & Selling Real Estate
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I bought a house at auction that has mold. What would you do?

Joey Allison
Rental Property Investor · AZ · Member since 2019 · 46 posts · 25 votes

Hey guys, I need some help. I bought a house at an auction. There was not access allowed to view the property prior to bidding. After I won the auction, I was walking around the house to get some more ideas on what to do in terms of rehabbing it. At that time the previous owner was there picking up her mail. She told me the interior is overgrown with mold. She sent me pictures. There is mold behind the base boards and between the grout of the tiles. No visible water damage was coming from the bathrooms. Most of the flooring had been removed so there is not much mold left in the floors. The previous owner believes there is a pipe leak in the foundation that is causing the mold growth. We live in the hot Arizona desert so mold is not very common here. I have received pricing to remediate the mold anywhere from $10k from a contractor or to $30k from a restoration company. 

Here are the facts: 

*I purchased the home for $89k.

*It has an ARV of $145k

*the home was built in 1954

*The home is 1,100 sq. Fr

*The renovations is expected to be $20k

*The mold remediation is likely to be $12k (based on a contractor’s opinion for a house of this size)

*I asked for a $20k bid reduction to help as a buffer in case the mold remediation goes over budget. I am waiting on an approval for this price reduction.

*I have not signed a buyer’s contract so I can technically still back out.

My question to you guys is, even if my new asking price is awarded, would you proceed with this investment or would you walk away and find a new investment?

Thank you guys!

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Jim K.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
7y

@Joey Allison

Hi Joey, @Caleb Heimsoth tagged me up because I have some experience with the mold hustle. What @Craig Jeppesen and @Doug McVinua have explained is pretty much all there is to it. You fix the leak, chop your walls open at the bottom to inspect, physical clear out the mold and spray surfaces with chlorine bleach and/or soaking agents (great stuff from homedepot.com) for absorbent surfaces.  Map the ductwork and mist your ducts with bleach. Do mold air quality tests with kits you get from HD or Lowes.

Mold strikes creeping terrors about developmental disabilities and childhood health hazards into the breasts of young mothers. It inspires furious denunciations against racist justice among minority populations. It has created an entire little industry of commercial mold remediation to take care of what has always been part of the human condition.

There was mold in the first caves that humanity took shelter in, mold in the Roman temples, mold in the Gothic cathedrals, mold in the teepees that the Indians erected on the prairies, mold in every camp, settlement, town, village, and city in the history of civilization. Any major health risks of mold are, at best, tenuous and unproven, at worst, wholly alarmist and specious. Look this up on reputable websites, most notably the Centers for Disease Control and Prevention. After that, if you come to the conclusion that for some nefarious reason the CDC and by extension USAMRID is full of bulls*** about the risks of mold, well, you're entitled to your own beliefs. Ain't we all. But understand you're leaving anything resembling the facts of the matter behind.

Fix the leak, chop open the walls, be prepared to redo drywall in places and floor trim, bleach, bleach, bleach, run your air quality tests. It's not rocket science unless you are required by a third party to get a mold remediation company involved. It's a serious hustle for a not-so-serious problem. Once you figure it out, you're going to welcome mold-infested properties as moneymakers for you.

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    7y

    If they can remediate it and the number work, why not buy it?  I'm assuming you are planning on flipping it, so as long as the mold is properly dealt with and the source of the water is fixed, then you are fine. 

    You should be able to tell if there is a leak, by shutting off all of the water and watching the water meter.

    2Reply
  • Joey Allison
    OP
    Rental Property Investor · AZ · Member since 2019 · 46 posts · 25 votes
    7y

    @Theresa Harris I guess my concern is not being able to inspect the inside of the property to see if the damage is more than I have room in the budget for. It’s a gamble that could pay off if I can remidate the mold under budget. But could bite hard if it goes over budget. 

    0Reply
  • Doug McVinuaPro Member
    Property Manager · Queen Creek, AZ · Member since 2016 · 608 posts · 426 votes
    7y

    @Joey Allison Mold is fairly common in Arizona, once moisture is introduced it can take off pretty quick.

    Mold is also very treatable in most cases. I would want to discover the extent of the mold by cutting about 18 inches off the bottom of the drywall in any suspect areas and viewing the wall cavity. If the wall cavity is full of black mold then go higher to see how far it goes.

    If you have limited mold in the wall cavities and the moisture came from below it would seem manageable.

    Of course you are going to also potentially need to re-pipe the dwelling to eliminate the bad pipe under the slab. Is the drainage good around the property? Sometimes water will be introduced from outside the slab also.

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    2Reply
  • Craig Jeppesen
    Rental Property Investor · Chubbuck, ID · Member since 2018 · 532 posts · 466 votes
    7y

    Just take 2 feet of Sheetrock off the bottom of the wall scrub with bleach seal with kilz and you should be good to go. Find the leak and fix it and you should be good to go.  I imagine you are changing the baseboards and flooring out anyway so it should only cost a few k For Sheetrock and kilz. This is what the restoration company is going to do but they charge a ton of money to do it. Also do a mold test once you are done so you can disclose any mold was taken care of.

    9Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    7y

    Now that you bought it, can you still not look inside?

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    @Theresa Harris He hasn't actually bought it, he is just the winning bidder on an REO auction.

    0Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    7y
    Originally posted by @Wayne Brooks:

    @Theresa Harris He hasn't actually bought it, he is just the winning bidder on an REO auction.

     Ahhh.  Thanks!

    0Reply
  • Joey Allison
    OP
    Rental Property Investor · AZ · Member since 2019 · 46 posts · 25 votes
    7y

    @Craig Jeppesen thank you!

    0Reply
  • Don Gouge
    Johnson City, TN · Member since 2017 · 209 posts · 367 votes
    7y

    Not picking on you by any means but why does someone buy a house without being able to see inside? I know people do this but why take such a risk? 

    0Reply
  • Joey Allison
    OP
    Rental Property Investor · AZ · Member since 2019 · 46 posts · 25 votes
    7y

    @Don Gouge I fully understand where you're coming from and here is my rationale: I have purchased 2 rental properties on MLS. One for $100k and the other for $115k. After closing costs I'm into those 2 properties for about $60k. That money is just sitting there, and I can't do anything with it. Also, that method of purchasing properties isn't scalable for me. I can't afford to pay $30k for each property that only NETS $250 per month. It would take me forever to reach my goals buying real estate at retail prices and putting 25% down each time.

    With auction homes, I can buy at a deep discount. Not all auctioned homes are going to be dumps with mold. So what I do is try to view the property from the outside and peak through the windows to get a good idea of what the inside looks like. I can get a pretty good idea of the condition of the property by knowing with the outside and some of the inside looks like. I think the mold problem is a not typical.

    Also, one more thing. If the mold turns out to be an easy fix and it only costs me $12k to fix and the auction company allows me to reduce my purchase price by $20k, I just added $8k to my profit by taking on a problem most people would never want to mess with. 

    I heard a quote the other day that may or may not help: “scared money, never made money”. Those who take on the higher risks often take home higher rewards.

    Just my thinking... everyone is different.

    4Reply
  • Joey Allison
    OP
    Rental Property Investor · AZ · Member since 2019 · 46 posts · 25 votes
    7y

    @Doug McVinua drainage is fine around the outside. The foundation is on sandy soil. Thanks for your input! Much appreciated 

    0Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y

    @Joey Allison talk to @Jim K. I doubt you need an expensive mold remediation company

    0Reply
  • Joey Allison
    OP
    Rental Property Investor · AZ · Member since 2019 · 46 posts · 25 votes
    7y

    @Caleb Heimsoth Thank you. My plan is to use a contractor for the work, but tell the auction company we spoke with a restoration company to help get the property at the reduced bid price 

    0Reply
  • Kao Saeteurn
    AZ · Member since 2018 · 78 posts · 40 votes
    7y

    @Joey Allison

    Joey, I am looking to buy at auctions also. I see you went to UofA, did you buy at the auction in Tucson? Would be interested in the process first hand if you can PM about it. Thanks!

    Good luck with the mold issue.

    0Reply
  • Jim K.
    Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
    7y

    @Joey Allison

    Hi Joey, @Caleb Heimsoth tagged me up because I have some experience with the mold hustle. What @Craig Jeppesen and @Doug McVinua have explained is pretty much all there is to it. You fix the leak, chop your walls open at the bottom to inspect, physical clear out the mold and spray surfaces with chlorine bleach and/or soaking agents (great stuff from homedepot.com) for absorbent surfaces.  Map the ductwork and mist your ducts with bleach. Do mold air quality tests with kits you get from HD or Lowes.

    Mold strikes creeping terrors about developmental disabilities and childhood health hazards into the breasts of young mothers. It inspires furious denunciations against racist justice among minority populations. It has created an entire little industry of commercial mold remediation to take care of what has always been part of the human condition.

    There was mold in the first caves that humanity took shelter in, mold in the Roman temples, mold in the Gothic cathedrals, mold in the teepees that the Indians erected on the prairies, mold in every camp, settlement, town, village, and city in the history of civilization. Any major health risks of mold are, at best, tenuous and unproven, at worst, wholly alarmist and specious. Look this up on reputable websites, most notably the Centers for Disease Control and Prevention. After that, if you come to the conclusion that for some nefarious reason the CDC and by extension USAMRID is full of bulls*** about the risks of mold, well, you're entitled to your own beliefs. Ain't we all. But understand you're leaving anything resembling the facts of the matter behind.

    Fix the leak, chop open the walls, be prepared to redo drywall in places and floor trim, bleach, bleach, bleach, run your air quality tests. It's not rocket science unless you are required by a third party to get a mold remediation company involved. It's a serious hustle for a not-so-serious problem. Once you figure it out, you're going to welcome mold-infested properties as moneymakers for you.

    10Reply
  • Heath M.
    Rental Property Investor · Chattanooga, TN · Member since 2017 · 203 posts · 188 votes
    7y

    I just dealt with some too, found a poorly installed window that was letting water pour into the block walls (basement unit) every time it rained.  I cut sheetrock out until it was contained.  Probably should have used bleach but I used Concrobium from Lowe's.  Cleaned everything up and put up fresh sheetrock.  Just have to finish and paint now.  Also fixed the outside and installed a french drain down the side of the house.  Painted all the exposed block from my drain ditch up with the rubberized foundation coating as well.  That part was over kill but I had caulked some cracks and the window fix was multi colored with new flashing and caulk so now it's all black.  Figured the extra $50 and 3 hours of my time would make the side look better...

    1Reply
  • Trudy Pachon
    Investor · San Diego, CA · Member since 2015 · 89 posts · 89 votes
    7y

    @Jim K. Exactly right! We had a mold situation in one of our rentals and did the work ourselves. We are not afraid of mold. I did the normal, cut our the drywall, clean with bleach, fix the pipe, and viola, it's done. I saved many thousands that way, and it was a good learning experience for me. I also used a product at Home Depot called Concrobium and rented an atomizer there to treat the inside of the walls. It's like a bug bomb, but it sprays the mold preventer. I think I went above and beyond, but I wanted to be sure the mold didn't come back!

    As a side note, I've been in SE Asia for the last eight months, and in Hanoi, Ho Chi Minh, Bangkok, and Phnom Penh, etc. the buildings were literally covered in "black mold" inside and out. You just can't get away from it. It's so humid everywhere. The people are way more healthy than we are (probably a diet thing and exercise thing) with old people running across the streets and riding motos! The Vietnamese would think us very silly for our overreaactions to something as mundane as mold! No one says a word about it.

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Jim K.:

    @Joey Allison

    Hi Joey, @Caleb Heimsoth tagged me up because I have some experience with the mold hustle. What @Craig Jeppesen and @Doug McVinua have explained is pretty much all there is to it. You fix the leak, chop your walls open at the bottom to inspect, physical clear out the mold and spray surfaces with chlorine bleach and/or soaking agents (great stuff from homedepot.com) for absorbent surfaces.  Map the ductwork and mist your ducts with bleach. Do mold air quality tests with kits you get from HD or Lowes.

    Mold strikes creeping terrors about developmental disabilities and childhood health hazards into the breasts of young mothers. It inspires furious denunciations against racist justice among minority populations. It has created an entire little industry of commercial mold remediation to take care of what has always been part of the human condition.

    There was mold in the first caves that humanity took shelter in, mold in the Roman temples, mold in the Gothic cathedrals, mold in the teepees that the Indians erected on the prairies, mold in every camp, settlement, town, village, and city in the history of civilization. Any major health risks of mold are, at best, tenuous and unproven, at worst, wholly alarmist and specious. Look this up on reputable websites, most notably the Centers for Disease Control and Prevention. After that, if you come to the conclusion that for some nefarious reason the CDC and by extension USAMRID is full of bulls*** about the risks of mold, well, you're entitled to your own beliefs. Ain't we all. But understand you're leaving anything resembling the facts of the matter behind.

    Fix the leak, chop open the walls, be prepared to redo drywall in places and floor trim, bleach, bleach, bleach, run your air quality tests. It's not rocket science unless you are required by a third party to get a mold remediation company involved. It's a serious hustle for a not-so-serious problem. Once you figure it out, you're going to welcome mold-infested properties as moneymakers for you.

    Love this post..  if your in the distressed asset business mold is present in almost every deal your going to do .. same with anyone buying a turn key home.. mold was probably present before you bought it. etc.. 

    I look at some hoarder homes I buy and people have lived in them for decades mold and all..   Bleach BLEACH bleach.. scrub scrub scrub. Kilz I like the houses we buy that have toad stools growing out of the carpet  ..  

    its just like when lawyers scare you about asset protection or litigation.. mold folks scare you about mold.. but if your going to buy auction homes get used to it.

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    4Reply
  • Joey Allison
    OP
    Rental Property Investor · AZ · Member since 2019 · 46 posts · 25 votes
    7y

    @Jim K. wow, thanks for the confidence lift. I believe a lot of what you’re saying about the existence of mold throughout history. I am feeling a lot better about rolling up the sleeves and getting after this rehab. Thanks again Jim. Be well.

    4Reply
  • Austin Moore
    Los Angeles · Member since 2019 · 13 posts · 2 votes
    7y

    @Joey Allison this is the clearest reasoning for using this method and I really needed to hear it. I am a newbie with not a while lot to invest at this point so this seems to be the quickest way to scale (if done right of course). Thanks for the insight!

    0Reply
  • Jim K.
    Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
    7y

    @Joey Allison

    You're welcome.

    Just to follow up: concrobium is a great product, equally or more effective than bleach in all applications, but superior for cleaning dimensional lumber.

    I didn't mention oil-based Kilz Original interior primer in my first post but I use gallons of the stuff in the old houses I work in during the renovation phase. The main thing you need to work safely with the interior variety is to set up box fans (I use two of the popular Lasko Wind Machines) for forced ventilation, but you should also wear a reusable respirator with VOC cartridges. I use the standard 3M 7500-series half mask with their VOC cartridges. A lot of people use the expensive round pink P100 particulate filters in their respirators for clearing out mold. 3M aggressively markets them for this use. I don't. I just use an N95 mask, like I do for most dust applications.

    1Reply
  • Joey Allison
    OP
    Rental Property Investor · AZ · Member since 2019 · 46 posts · 25 votes
    7y

    @Jim K. 🙏🏻

    0Reply
  • Geordy Rostad
    Real Estate Broker · Kirkland, WA · Member since 2018 · 549 posts · 411 votes
    7y

    I sold a house one time to a rehabber where the previous owner stripped the home and sold everything including the metal roof! This was in the Pacific Northwest so needless to say, it was absolutely riddled with mold. Everywhere you could think of was moldy. My buyer knew it ahead of time so he planned for it.

    He ended up stripping it down to the studs, he put a roof back on the house, then he hired a company to do ozone treatment on the house. They treated it for several days and moved the machines around into the crawlspace and into the attic, etc. After that, the mold was definitely dead. He painted out the worst spots with Kilz and proceeded to rebuild the house. The whole time during this process, he took pictures to document how it was treated so it could be shared with any inquisitive buyer. Obviously he had to disclose it on the Form 17 (Seller disclosure) so he knew there would be questions.

    The house turned out beautifully. Ended up being a great project but certainly not for the faint of heart.

    Your case sounds nowhere near this extreme but I still might consider adding ozone treatment to the excellent suggestions everyone else has already made. Also, document the process with photos. Post a few back here even. They might help someone later who stumbles onto this thread.

    1Reply
  • Joey Allison
    OP
    Rental Property Investor · AZ · Member since 2019 · 46 posts · 25 votes
    7y

    @Geordy Rostad absolutely! Love that idea 

    0Reply
  • Kelly A.
    Wholesaler · Eau Claire, WI · Member since 2014 · 133 posts · 32 votes
    7y

    Toxic black mold is the worst. There's a difference than just black mold. I believe if you have a magnifying glass and a book to see what it looks like, you can identify if it's toxic. Maybe it has spurs on it or something.

    We had a run into black mold recently in our residence. Caulked between tub and surround to stop leak, got clothes in basement out from under leak, spray bottled all mold areas including basement ceiling joists, then mold kill primer to seal it up. Also taped a funace type plastic drain hose to garden hose from dehumidifier and ran it directly into floor drain & zip tied it to drain. Utilized childproof feature so our kids can't shut it off anymore and put it on basement mode (it runs continuously now). Got approved by city inspector. He mentioned that i did a whitewash job. Ironically i used to whitewash dairy farm barns when i was a young adult, lol.

    0Reply
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