Here’s why it’s so important that you review and understand seller disclosures; and follow up as necessary when you do your own home inspection.
Most state-required real estate disclosures are made using a standard form, on which the seller checks off features of the property and rates or describes their condition. The typical disclosure form is a few pages long and describes features like:
Some disclosure forms also cover legal issues, such as ownership problems, disputes concerning the property, and community association fees.
The forms might even require information about suicides, murders, and other deaths on the property; nearby criminal activity; or factors such as excessive neighborhood noise or other things affecting a house’s desirability or value.
Sellers are basically responsible for disclosing only information within their personal knowledge—that is, they don’t necessarily need to hire inspectors to turn up hidden problems. And they probably aren't construction experts, and might not have visited their own attic or crawlspace in a long time.
If you’re buying a new house that hasn’t yet been built, the developer obviously won’t have much to disclose—but might still need to tell you about things like the type of soil; previous uses of the property; possible future uses of surrounding land; and the developer’s intentions regarding existing trees, streams, and natural areas.
Disclosure requirements vary among states, from the detailed to the bare-bones. See State Disclosure Laws for examples. To find your state’s law, talk to your real estate agent or state regulatory agency.
The key question is how much your state law requires the seller to disclose to buyers? If the standard form doesn’t mention past flooding, for example, the seller might not have to either (but shouldn’t lie if asked).
You might want to read your state’s law, or at least the form, to look for holes. Some forms have an "other" category, and a requirement that sellers reveal all material defects. A seller who forgets said flooding, or is looking for an excuse not to mention it, might leave the "other" blank.
You can find your state real estate agency at the Association of Real Estate License Law Officials website. Or search online for “real estate disclosure,” “disclosure form,” or “disclosure statement” and the name of your state.
Even in nondisclosure states, buyers can negotiate to make seller disclosures a part of their purchase—or may get them without asking. Law or no law, your state Realtors association has probably created a standard disclosure form for sellers to use.
Broadly speaking, real estate sellers need not actually hire inspectors to look around a house and prepare a report (or reports) covering its defects, pests, faulty appliances, and so on. But some sellers do get a pre-sale inspection done anyway. This is largely so they can plan ahead, set a reasonable purchase price, and possibly repair some issues in advance.
If the seller commissions such a report, and seller disclosures are required in your state, they will be obligated to disclose the findings to buyers. In fact, you should expect to see an actual copy of the report.
Does this mean you can't do your own home inspection before closing on the deal? In most cases no, though it's all a matter of negotiation. Some seller's realtors might discourage you from having your own inspection done, particularly in hot markets. They'd rather deal with buyers who will waive the inspection contingency and therefore proceed more smoothly and speedily toward the closing.
Ask your real estate agent about the reputation of the seller's inspector in this situation, however. You don't want to rely on a report done by someone known for laxness.
If you are buying a house built pre-1978, federal law requires the seller to give buyers a form disclosing whether there might be lead-based paint in the home and a pamphlet called “Protect Your Family From Lead in Your Home.” For more on the subject, see Seller Responsibility to Disclose Lead-Based Paint Hazards.
Be aware that this disclosure requirement focuses mostly on paint. Lead can sometimes hide elsewhere, such as in ceramic tiles with lead mixed into the glaze. This isn't considered a significant health issue when the tiles are intact, but if, for example, you have a toddler who might crawl around on a floor where the tiles are chipping, it could be worth a closer look by your home inspector.
Exactly when you’re given the seller’s disclosures varies by state. In a few states, sellers must give you disclosures before you’ve made an offer. But most states don’t require the seller to do this until after you’ve made an offer, often just before the two of you sign the purchase agreement.
What you read in the seller’s disclosure report could affect your decision whether to make an offer. To find out more about a topic mentioned in the form, ask for it in writing. Be sure that the home inspector you will hopefully hire checks out some of these items in more detail.
If you receive the disclosure form after making an offer, you can cancel the sale if you don’t like what you read.
Even after the sale has closed, if a problem pops up that you believe the seller knew about and didn’t disclose, you can sue the seller on that basis. See Home Defects: Sue the Seller, Agent, or Property Inspector? for details.
Most states put some teeth into their disclosure laws, by allowing buyers to cancel the sale if the seller doesn’t provide the disclosure form or doesn’t fill it out completely and honestly. Some states also charge monetary penalties to sellers who violate the law, or punish sellers’ real estate agents for failing to disclose problems that they observed or were told of by the sellers.
Again, however, remember that sellers aren’t usually required to poke around for problems—just to tell you what they already know. A house’s owners can remain blissfully unaware of many serious problems—a cracked foundation, termites deep in the walls, or a roof on the verge of leaking—and won’t be held responsible.
That’s why getting a professional home inspection is highly recommended. See Getting a Home Inspection for more on the subject. And be sure to do a careful review of any inspections the seller provides such as pest reports (common in California).
For more on real estate disclosures, home inspections, and other ways to check out a house, see Nolo’s Essential Guide to Buying Your First Home, by Ilona Bray and Ann O'Connell.
]]>As part of their disclosure rules, many states require home sellers to disclose details on environmental hazards that they know about, such as lead (see Seller Responsibility for Disclosing Lead-Based Paint Hazards) and mold (see Mold: Is It Hiding in the Home You're Buying?). This article focuses on legal and practical issues for home sellers regarding asbestos in the home.
Exposure to asbestos has been clearly linked to an increased risk of cancer, particularly for workers in the asbestos manufacturing industry or in construction jobs. Recognizing the health dangers of asbestos, the U.S. Occupational Safety and Health Administration (OSHA) sets standards for the testing, maintenance, and disclosure of asbestos in the workplace. While OSHA regulations do not cover single-family homes, many states require that sellers disclose information on asbestos on the disclosure forms they provide to homebuyers.
If your state requires disclosure of asbestos on your property, and you know about (but did not disclose) its presence, you could be sued by the buyer for damages suffered, such as lung and other health-related problems caused by inhaling asbestos fibers.
Houses built before 1975 or so often contain asbestos insulation around heating systems, in ceilings, and in many other areas. Until 1981, asbestos was also used in many other building materials, such as vinyl floors and tile.
If you’re concerned that a material contains asbestos and is airborne or about to be (for example, you have insulation that is falling apart, or drywall is crumbling due to recent home remodel), hire a trained and accredited asbestos professional to assess the situation and make any necessary repairs. When removal is necessary, hire trained asbestos removal specialists, and make sure the debris is legally disposed of in approved hazardous waste disposal sites.
If you are planning any house remodeling in an area you suspect contains asbestos material, be sure to find out whether or not that’s the case before you start the work.
For undamaged material that you know (or suspect) contains asbestos, it’s best to leave it alone and monitor it for signs of damage that could result in release of asbestos fibers. Also, limit access (especially by children) to the particular area, such as an attic.
For specific tips on identifying and dealing with asbestos hazards in your home, and hiring an asbestos professional, see the U.S. Consumer Product Safety Commission information on Asbestos in the Home.
For additional information on asbestos, including state asbestos contacts, see the Asbestos section of the EPA website.
]]>(Also see Nolo's articles on Airbnb and Other Short-Term Rentals of Your Home.)
A number of issues commonly arise with illegal construction, such as:
If you decide that purchasing a house with unpermitted construction is not worth the risk, you can walk away, assuming you're not too deep into the closing process by now.
Another option is to negotiate to have the seller obtain required permits prior to sale. This might be a good solution if you are willing to be flexible with the closing date. (The permitting process can be lengthy and unpredictable, so think in terms of months, not weeks.)
If you do choose to go forward with the home purchase, consider the terms of your offer carefully. The property might well be worth less than its list price. For example, the market value of a two-bedroom house with an illegal in-law unit is actually closer to that of a two-bedroom house without the extra unit.
]]>Below is an overview of how this typically plays out, including:
You can skip the below discussion of negotiating over repairs and skip to the last section if you included only what's commonly called a "yes/no" inspection contingency in your purchase offer and contract. That means you've specifically promised that your only options are to go ahead with the deal as signed or back out entirely, with no negotiations over repair needs.
Most buyers arrange a general inspection of the house’s physical and structural components to check out defects in the property, such as a leaky roof or a heating problem. In many parts of the United States, pest inspections are also common. (Institutional lenders often require them.) Also, some buyers bring in specialized inspectors to cover aspects of the property beyond the general inspector's scope of expertise, such as a structural engineer to evaluate a foundation.
Rare is the house that does not have a few hidden flaws or defects that you won’t know about until after the inspection. After reviewing the inspector’s report, you’ll most likely have to decide:
Discuss with the inspector or outside contractors whether the problems can be fixed and if so, how much repairs are likely to cost. A pervasive mold problem, for example, might not be fixable, but repairing an old air conditioning system won’t typically require a team of specialists.
If a problem can’t be fixed, you must decide whether you still want to buy the house. In some states, your standard inspection contingency will say that you must give the seller a chance to fix a problem before backing out of the deal. But if the problem truly can’t be fixed, you should be able to walk away from the deal.
Your first inclination might be to ask the seller to pay for everything. You can certainly try, but don’t be so unreasonable that the seller says, “Forget it!” It really depends on the repairs and how necessary (and expensive) they are. If you’ve got some leverage—for example, you know the seller needs to move fast or that the house sat on the market for months before your offer came along—you can push harder for the seller to pay for all repairs. But if you know that the seller is sitting on a backup offer that is higher than yours, you’re best off keeping requests to a minimum.
If the seller agrees to be financially responsible for all or some repairs, the two of you can handle it in a variety of ways, including:
Have the seller credit you a portion of the purchase price. Normally, when a deal closes, the seller gets paid the full contract price. Instead, you can have the seller agree to have the amount needed for repairs transferred directly to you at closing or put into a special account, which you’d draw on after closing. (Lenders prefer the latter, because it gives you an incentive to make the repairs rather than pocket the money.) Of course, having the seller credit you money for repairs assumes you and the seller agree on the estimated repair costs and that those estimates will be accurate enough that you don’t get stuck with a big bill.
Reduce the sale price by the estimated cost of repairs. The advantage to this is that, with a lower purchase price on record, your annual property taxes will be lowered, as will your transfer tax if you live in a state where they’re required (from the buyer, not the seller). You can do the repairs whenever you like—though you’ll have to come up with the cash on your own.
Trust the seller to hire someone to make the repairs before the closing. Unless the repairs are fairly simple (such as a broken window latch), this tends to be a bad idea. The seller might do the repairs on the cheap, or worse, attempt a do-it-yourself job.
Hire someone to make the repairs before the closing, with the seller paying. This could raise more problems than it solves. If the repair takes longer than expected, you could bump into your closing date.
There might be situations when you’re responsible for the cost of repairs. For instance, maybe you got an especially great deal on the sales price and the seller won’t negotiate on repairs. You might plan to handle the work after you’ve been in the house for a while.
Unfortunately, you won’t always have the option of delaying the repairs. Your lender can require certain repairs to be done before the deal is finalized. If you’re paying for those repairs, discuss this with your mortgage broker—creative solutions are possible, such as taking out a larger mortgage to cover the repairs or reducing your down payment to free up the cash.
Sometimes, a general inspection will reveal that another specialized inspection is needed—for example, if the general contractor who did your inspection has identified drainage problems on the property and recommends you consult with a soils engineer.
If you’re close to the deadline when you must remove an inspection contingency, and you want to arrange more specialized inspections, you’ll need to ask the seller for additional time (in writing). The seller could say no, perhaps as an excuse to back out of the deal. Most sellers, however, are motivated to close the deal and will agree to a reasonable request.
If you're buying a newly constructed home, be sure you negotiate a "final inspection" contingency, which allows you to bring in a professional to approve the completion of the house before closing. Be prepared for unpleasant surprises—legions of homebuyers have discovered unfinished construction or major defects just days before they were supposed to move in, such as:
If you discover any defects in your newly built house, you have several options:
Delay the closing. This is your most obvious choice, but it might be impossible if you’ve arranged to move.
Go ahead with the closing, but have the developer put aside money to make the repairs. Your next-best bet is to go ahead with the closing but insist on a written agreement saying the money needed to complete your house will be taken from the purchase price and put into a trust account that the developer can’t touch until the work is done. To protect yourself, add new deadlines to this agreement and state that if the work isn’t done by then, the money must be returned to you. You can then hire outside contractors to finish the job. Get an attorney’s help drafting an addendum to your agreement.
Make a list of the remaining tasks, assign each a completion date, and insist that the developer sign it before you agree to close. If you can’t get your developer to delay the closing or set up a trust account to finance the repairs, this type of “punch list” might be your only option. Unfortunately, you’ll have to chase down the developer to get the work done.
For serious problems that you can't or won't negotiate over, you might want to cancel the sale. This is a simple matter of refusing to remove the inspection contingency by the date given in the contract. Since the seller might not be keeping a close eye on the date, however, your agent will likely want to communicate the fact that you will not be removing this contingency, and wish to cancel the deal. Because this was a possibility contemplated within the purchase contract, the seller should refund you your earnest money deposit.
If you receive the inspection report and are either happy with what it showed or have successfully negotiated over repairs with the seller, it's time (assuming the deadline hasn't passed) to remove the contingency. The procedure for doing that depends on state law or custom.
In some states, buyers can just wait for the deadline to pass without them canceling the sale, and it will be assumed that they've removed or waived that contingency. Other states require more active steps, most often buyers having to remove the contingency in writing using a standard form. Your real estate agent and escrow company will know the procedures in your state, and can help you keep track of the deadlines for removing the inspection and other contingencies.
]]>In an ideal world, a home inspection should be included in your purchase contract as a condition of closing the sale (a "contingency"). But not all buyers ask for it. Here, we'll discuss the how's and why's of getting a home inspection.
No matter how good the house looked, or how savvy your real estate agent, it takes a professional to test and prod for hidden defects. Even if the seller provides you an inspection report, it's best not to rely on this alone. The seller might have chosen an inspector who's not known for rooting out problems.
You'll likely want to hire at least one and possibly more professionals to check out the building's structure, systems, and physical components, such as the roof, plumbing, electrical and heating/cooling systems, major appliances, floor surfaces and paint, windows and doors, and foundation, and detect pest infestations or dry rot and similar damage. The inspector should also examine the land around the house for issues concerning grading, drainage, retaining walls, and plants affecting the house.
In many states, such as California, sellers are required to disclose considerable information about the condition of the house itself and potential hazards to the property to prospective buyers. (See Required Disclosures When Selling U.S. Real Estate.) Review these disclosures yourself, and make a copy available to any inspector you eventually hire.
But the contents of the disclosure are just the beginning: Not all sellers know about problems with the house or honestly disclose them. Sometimes they've lived with a problem for so long, such as low water pressure or a jiggly door, that they've literally forgotten it's there!
In tight markets, buyers are known to waive (not add to their offer as a condition of sale) the inspection contingency, so as to make their offer more attractive to the seller. Including the contingency could, in such a case, drop your offer to the bottom of the pile. It's a risk you'll have to evaluate with the help of your agent.
The more problems you can spot on your own, and the greater severity they seem to represent, the more you might want to hold firm on getting an inspection.
One middle-ground option is to condition the sale on what's known as a "yes/no" inspection, meaning that you can use the results as a reason to back out of the deal entirely (with the assumption that this you'd do this only because something major turned up) but won't use it as a basis to negotiate for price reductions or repairs.
Most buyers get professional inspections only after they're in contract to buy the property. The closing of the deal is commonly made contingent on the buyers' approving the results of one or more inspections. The buyer arranges and schedules the inspections.
Before paying for a professional inspection, you can conduct your own informal inspection. Look for issues like sloping floors or bowing walls, signs of water damage, missing roof shingles or gutters coming loose, old or low-quality fixtures and appliances, and other signs of wear, tear, or needed repair. The best time to do this is before you make an offer, so that you can save yourself the trouble should you find serious problems.
You'll find a checklist and further instructions in Nolo's Essential Guide to Buying Your First Home.
Another, less commonly used possibility is to ask the seller to let you do a "preinspection" before submitting your offer. Why, given the cost of these inspections, would you do this?
Because if you're in a situation where you're competing against other buyers (which can happen in any market, if a house is particularly desirable), this can help you set your offer apart. You'd most likely be able to submit an offer without an inspection contingency, thus reassuring the seller that your offer price is firm, not something you're likely to whittle away at after you're in contract, based on whatever a later inspection reveals. (On the other hand, you risk coming in with an offer price that's lower than others', having taken the house's problems into account; which only you know about at that point.)
Some sellers will refuse to allow preinspections in any case, particularly because, if you alert them to problems with the house, they're then likely obligated to divulge these to other potential buyers as part of their state's disclosure laws.
Hire a general contractor or home inspector to inspect all major house systems, from top to bottom, including the roof, plumbing, electrical and heating systems, foundation, and drainage.
This will take two or three hours and likely cost you $300 or more, depending on the location, size, age, and type of home. Accompany the inspector during the examination, so that you can learn more about the maintenance and preservation of the house, ask questions, and get a real sense of which problems are serious and which are relatively minor. The inspector will write everything down on the report, so reading it can be a bit scary if you hadn't already seen that, for instance, "cellulose against the foundation" just meant a pile of old leaves that you could easily remove.
In addition to the general inspector, it's wise to hire a licensed structural pest control inspector, who will create a special pest report on the property (unless the seller has already commissioned one). Pest inspectors, unlike general inspectors, traditionally accept work on properties they've inspected, so they have every interest in finding problems.
The pest inspector will look for infestation by wood-boring insects such as termites and flying beetles, as well as evidence of dry rot and other fungal conditions.
Some general contractors are also licensed pest control inspectors, but will normally charge extra for doing double duty. Be sure you get a written report of all inspections.
Depending on the property and your personal sensitivities, you might want to arrange specialized inspections for hazards from floods, earthquakes, and other natural disasters. The same goes for environmental health hazards such as mold, asbestos, and lead. If the garden area is important to you, or has features beyond the general inspector's expertise such as a pond or fountain, you might also need a separate landscape inspector.
And, if the general inspection revealed problems with the roof, foundation, or other areas that are hard to access or potentially expensive to repair, you might also want to hire a specialized inspector.
If the inspection reports show that the house is in good shape, you can proceed with the purchase, knowing that you're getting what you paid for.
If the inspections bring problems to light, such as an antiquated plumbing system or major termite damage, you can negotiate to have the seller pay for necessary repairs or to lower the purchase price. Or, you can back out of the deal, assuming your contract is written to allow you to do so.
To learn how to include an inspection contingency in your real estate purchase contract, see Contingencies to Include in Your House Purchase Contract.
For detailed information on all aspects of house buying, including more information on inspections and negotiations, get Nolo's Essential Guide to Buying Your First Home, by Ilona Bray and Ann O'Connell (Nolo).
]]>No matter what you believe about ghosts and the afterlife, it seems like some houses just have a lot more odd, unexplained activity than others. And such activity seems to ramp up at night, just when you're trying to get some shut-eye. So how would you find out about any such propensities in a house you'd like to buy?
Most U.S. states require sellers to fill out a standard form, revealing what they know about the property's physical condition. No, you're not likely to see a "haunted" box ready to be checked off on any state's disclosure form.
Nevertheless, real estate sellers are, in many states, obligated to disclose virtually anything that could affect a house's marketability, which the oddities described above certainly could. Smart sellers would describe exactly what they've observed, without drawing conclusions. Or, they might need to describe related issues like whether you'll face regular nuisances in the form of megaphones blasting from the local ghost-tour bus, or eager ghost-hunters taking photos through your windows.
It's best to start generally, with open-ended questions like, "Do you think that house would be a desirable place to live?" or "What can you tell me about the house's history?"
Too bad Jeffrey Stambovsky wasn't able to do a little Web-surfing before he bought a turreted turn-of-the-century Victorian home in Nyack, New York in 1990. Being from New York City, Stambovsky wasn't familiar with local legends, and the seller hadn't disclosed to him that the lovely riverfront home came with its own family of Caspers. According to reports by the previous owner, Mrs. Helen Ackley:
Once Stambovsky got wind of all this, he wanted out of the purchase. He took the seller and real estate agent to court, claiming fraudulent misrepresentation. The lower court was not sympathetic and ruled that the seller and agent had no obligation to disclose ghostly presences. But a New York appellate court made the astonishing ruling that the house was haunted:
"Whether the source of the spectral apparitions seen by defendant seller are parapsychic or psychogenic, having reported their presence in both a national publication (Readers' Digest) and the local press (in 1977 and 1982, respectively), defendant is estopped to deny their existence and, as a matter of law, the house is haunted."
Apparently the seller had sold her story to Reader's Digest for $3,000 and made a "verified" claim to the magazine that the house was haunted. As one contract lawyer pointed out, "If the seller now claimed in the litigation that the house wasn't haunted, the seller would have been caught in a $3,000 lie to Reader's Digest."
Stambovsky was allowed to back out of the $650,000 purchase.
But don't feel too bad for the sellers. Once word got out that the house was legally haunted, a new group of buyers were attracted to the property, including the well-known mentalist, The Amazing Kreskin.
For more information on buying a house, see Nolo's Essential Guide to Buying Your First Home, by Ilona Bray and Ann O'Connell.
]]>A professional inspector can turn up these sorts of problems and more, allowing them to be dealt with before they grow in scope or cause surrounding damage. Below, we'll discuss what to do if such problems turn up.
Ideally, you will have had your new house inspected at various points during its construction, such as when the foundation was poured and when the framing was completed. Nevertheless, the final inspection could uncover problems with your new house.
If this happens, you have several options:
Delay the closing. This is your most obvious choice, allowing time for the work to be redone or completed. It could, however, be impossible if you’ve already left your old dwelling and arranged to move.
Go ahead with the closing, but have the developer put aside money to make the repairs. If you go this route, insist on a written agreement saying that the money needed to complete your house will be taken from the purchase price and put into a trust account, which the developer can’t touch until the work is done. To protect yourself, add new deadlines to this agreement and state that if the work isn’t done by these deadlines, the money must be returned to you. You can then hire outside contractors to finish the job. Get an attorney’s help drafting an addendum to your agreement.
Make a list of the remaining tasks, assign each a completion date, and insist that the developer sign it before you agree to close. If you can’t get your developer to delay the closing or set up a trust account to finance the repairs, this type of “punch list” could be your only option. It's a common approach industry-wide. Unfortunately, it means you’ll have to chase down the developer to get the work done.
Some problems, such as flooding in the basement or a mold problem, might not surface until after you’ve moved in. If that happens, check to see whether the builder’s warranty (typical with new homes) will provides coverage. For details, see New Home Defects: Holding Your Builder Responsible Under a Warranty.
For a detailed guide to buying a new house, preparing a purchase contract, arranging inspections, and more, see Nolo’s Essential Guide to Buying Your First Home, by Ilona Bray and Ann O'Connell.
]]>The key, as we'll explain, is whether your contract included an "inspection contingency." This contingency conditions the closing on your receiving and being satisfied with the result of one or more home inspections.
Particularly in tight “sellers’ markets,” it's common for buyers to waive the inspection contingency or for houses to be sold “as-is.” Some buyers are willing to forego an inspection contingency in order to get a house for a low price, or to be chosen over other offerors.
If you made that choice, then backing out of your purchase contract will be considered a breach of contract, and you might not be able to get your earnest money back. Still, this is a matter for negotiation between your agents. If, for example, there are signs that the home sellers hid major problems before putting the house on the market, they might be shamed into giving you back your money.
If you’re reading this and haven’t yet entered into a purchase contract, take this as a lesson. You'll want to carefully consider whether to give up the inspection contingency. Otherwise, your earnest money could be at risk if you back out because of an inspection item.
It’s disappointing to find out that what you thought was your dream house is actually a potential nightmare. However, this is actually the whole point of the home inspection. Most of the time, the purchase contract will contain an inspection contingency, which allows you an “out” if, after completing your home inspection, you decide the house just isn’t right for you.
Read your purchase contract carefully and determine when the deadline is for your home inspections to be complete. Assuming that you are still within that deadline, you should then read the contract to determine how you must go about telling the seller that you wish to back out of the contract.
One of the best things about the home inspection contingency in a purchase contract is that, in most contracts, it is a highly subjective contingency. In other words, the buyer most likely has the option to back out of the contract prior to the inspection deadline for nearly any reason: the house smells funny, it turns out that there isn’t a sprinkler system, or the buyer just feels the house has bad juju.
This might not be the case with all purchase contracts, so read yours carefully. But if you are using a state-approved form for the purchase, you will in all likelihood be able to back out of the contract before the inspection deadline for a wide range of reasons. After all, before putting in an offer, most buyers only see the house once or twice. The inspection contingency allows buyers to be more circumspect and get more of a feel for the house before entirely committing.
If yours is like the typical home purchase contract, you must notify the seller in writing before the deadline. Some states will have forms specific to this issue that you can use to inform the seller that you're backing out. So long as you notify the seller of your intent prior to the deadline and by the method specified in the contract, you should get your earnest money back in full.
If you are past the inspection deadline, though, it is possible that your earnest money might not be refundable. Speak to your real estate agent and, if necessary, a real estate attorney for a full analysis.
]]>That's what this article will discuss.
(To learn about mold in rental units, read Mold in Rentals: Landlord Liability, Responsibility, and Prevention.)
Mold is a fungus that comes in various colors (black, white, green, or gray) and shapes. While some molds are visible and even odorous, mold can also grow between walls, under floors and ceilings, or in less accessible spots, such as basements and attics. Mold does best in water-soaked materials (paneling, wallboard, carpet, paint, ceiling tiles, and the like), but can survive in almost any damp location. Mold can grow in houses situated in the desert, and it can grow in homes in hot and humid climes.
Here are common places in a home where mold is likely to take hold:
Besides presenting an ugly appearance and sometimes an unpleasant odor, mold can cause health problems. A few types of molds produce mycotoxins, which can cause rashes, seizures, unusual bleeding, respiratory problems, and severe fatigue in some people. Fortunately, most molds are of the non-toxic variety.
For more on the hazards of mold, see Toxic Mold Health Risks and the resources listed below.
You won't always know if there is mold in a house you're considering buying, but you can take a few easy steps to try and find out.
Be on the lookout for mold. When thinking about buying a home, look for the elements above to figure out if there are any obvious signs of mold or the potential for it to grow. Keep your eyes peeled for standing water in the basement, water marks on walls (particularly recent-looking stains), or musty smells (particularly in bathrooms, kitchens, laundry rooms, basements, cabinets with plumbing, or other areas with plumbing).
If you're looking at a newer home, find out whether it is built with "synthetic stucco," also called the Exterior Insulation and Finish System (EIFS). This airtight barrier is supposed to improve insulation but, if improperly installed, may allow water penetration and mold growth on the inside of walls.
Ask your home inspector. If you have the home professionally inspected before buying, your home inspector might see obvious signs of mold or water damage. While it's not the inspector's job to look for mold, most home inspectors will mention obvious signs of water damage and the possible presence of mold. And, because inspectors poke around in spaces you might not, they might see things you wouldn't. For more information, see Getting a Home Inspection Before a Real Estate Purchase.
Don't hesitate to ask whether the inspector saw signs of mold or potential mold dangers, and ask that these results be included in the inspection report. Some inspectors might be wary of this, wanting to avoid liability for mold-related problems. But all should be comfortable talking to you about whether they saw anything suspicious or that warrants bringing in a separate professional.
Ask the seller to disclose any mold or water-related problems. Some states, including California, require sellers to disclose information about mold. Keep in mind that the seller's duty to disclose only relates to things the seller knows about or reasonably should know about: Sellers don't have a duty to go poking around in the walls to see if there's mold, for example.
In states where mold disclosure is not required, you can still ask for such disclosure. In addition, you could ask questions about things that might lead to mold growth, such as "Have any pipes ever burst?" or "Have any of the windows ever leaked?"
For details on state disclosure requirements, see Required Disclosures When Selling U.S. Real Estate.
Listen to agents and appraisers. In some states, real estate agents or brokers have a duty to disclose problems they know about. Likewise, an appraiser should notify you of any obvious sign of a mold problem if it could affect the value of the property.
Add a mold-related contingency to your offer. Assuming you're interested enough in the house to place an offer on it, making the sale contingent on your satisfaction with the results of specific inspections for mold lets you back out if the inspection finds a mold problem. Unfortunately, tests for mold are difficult to conduct and expensive. And, according to the U.S. Environmental Protection Agency (EPA), testing for mold isn't usually necessary when it's visible on surfaces. Most people will end up relying on the detection methods discussed above.
Nevertheless, if you have reason to suspect there's hidden mold in the home, you might elect to hire a professional mold testing company. These companies test the air in and around the home. They can also dig into walls and take samples, which they later test in a laboratory. Testing the air usually costs several hundred dollars. If the company takes wall samples, the cost will be even higher.
If you find a house and discover it has mold problems, should you buy it anyway? If you or a family member has asthma or if a baby or an elderly person will live in the house, you'll want to be especially concerned. You'll have to decide whether the cost of removing the mold and fixing the source (both in terms of time and money) is worth the price you'll pay.
If you have an inspection contingency in your purchase contract, and the mold is revealed as part of the inspection, or if you have a specific mold contingency, you have a bargaining chip. You can ask the seller to reduce the asking price or to fix the problem. Alternatively, you can choose to walk away from the deal. (To learn more about inspection contingencies, read Contingencies to Include in Your House Purchase Contract.)
If the prior owner of a house you bought knew of the presence of mold and was required to disclose this information under state real estate disclosure rules, but did not do so, the owner could be liable to you for failure to disclose. See Who to Sue for Toxic Mold for more on the subject. Other useful articles include Home Defects: Sue the Seller, Agent, or Property Inspector, which provides useful advice on determining who’s legally responsible for home defects and how to file suit. For advice on dealing with problems in a new house, see New-Home Defects: Holding Your Builder Responsible Under a Warranty.
The U.S. Environmental Protection Agency (EPA) provides extensive information on mold, including advice on cleaning up mold after a flood in your basement. The Centers for Disease Control and Prevention (CDC) also offers useful resources on mold on its website.
Most of the mold-related regulations occur at the state level. For example, California, Indiana, Maryland, New Jersey, and Texas have passed legislation aimed at developing guidelines and regulations for mold in indoor air. Try checking the state agency responsible for mold and indoor air quality, or monitor the National Conference of State Legislatures (NCSL)'s Environmental Health Legislation Database, which tracks state legislation on environmental health hazards, including mold.
For more practical homebuying tips, get Nolo's Essential Guide to Buying Your First Home, by Ilona Bray and Ann O'Connell (Nolo).
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