BluefoxToday blog : Water Damage & Mold May Hurt Your Chances of Getting a Home Loan!

Water Damage & Mold May Hurt Your Chances of Getting a Home Loan!

Las Vegas Water Damage HomeI am beginning another series about “Things That Can Make Your Las Vegas Financed Home Purchase *Blow Up* in the Middle of a Transaction.”

My ultimate goal in this series is to make Las Vegas Home Buyers aware of the challenges of a specific home’s eligibility for financing.

Congratulations!  Your lender just approved you to purchase a Las Vegas area home by looking at your check stubs, debt to income ratio and you are now approved to purchase a Las Vegas area home!

Hold the phone here, *you* may be eligible to purchase a home but is the house eligible for financing?  This series is designed for you to research a home’s eligibility for financing.

DISCLOSURE:  I am not a lender, title company, home inspector, contractor or appraiser.  I am only speaking from personal experience by working with financed Las Vegas area home buyers.  Hopefully you have hired a Las Vegas area real estate agentwho will be able to spot things that can *potentially* cause problems with your financing (mostly FHA/VA) before your contract to purchase a Las Vegas area home.

Much of Las Vegas is currently priced in fire sale status.  Many times when you see unusually inexpensive homes there is a reason – they are not eligible for financing and the seller does not wish to rehabilitate the home to make it eligible for financing.

Today’s topic at hand is “Water Damage & Mold“.  Las Vegas Mold

Water Damage & Mold may occur for various reasons:

  • A Construction Defect From a Slow Leak
  • Malicious Exit From Previous Occupant
  • The “Elements” or Weather
  • Something “Accidental”

The effects of water damage and mold could be from deferred maintenance, recent or can occur in the middle of a transaction.

An example of deferred maintenance would be a leaky roof (weather elements) or construction defect such as an incorrectly plumbed or faulty toilet base & wax ring.

Even though we don’t have “Freezing Elements” too often here, it does happen every once in a while resulting in a cracked pipe here and there.  More often than not, weather elements would be from heat & lack of utilities – baking, melting and cracking plumbed items.

Accidents do happen and some you have to wonder about bordering on being “malicious” from a former occupant.  An example of this would be:  a refrigerator water valve or plumbing valve left on.  Water company comes to turn on water and forgets to check meter.  House gets flooded.  Another example would be a deep nail or screw in the wall securing something and it hits a pipe – water may pour down walls.

Many of the above examples may cause problems with lenders funding a loan.  Sometimes the sellers are willing to remedy the situation, many times in the case of REO (aka BANK OWNED) – not.

A good home inspector will have a moisture meter on hand to be able to tell if a suspicious water damage or moldy area is dry or if moisture is still present and feeding the moldy source.

If your financing goes “kerplunk” due to a water damage or moldy mess, you may want to consider qualifying for an FHA 203K rehab loan!


Thanks,  Renée Burrows 702-580-1783 Broker/Owner, REALTOR®
 

 

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Comment balloon 48 commentsRenée Donohue • October 30 2010 10:37AM

Comments

Renee, this will be a great series for your potential buyers!   I would not think LV would have too much trouble with mold, being so arid.   We only have mold when water pipes burst, and remains in the home.

Posted by Joan Cox, Denver Real Estate - Selling One Home at a Time (Metro Brokers - House to Home, Inc. - Denver Real Estate - 720-231-6373) almost 8 years ago

Yes...dear lady this subject of your post can bring down the house literally. Lenders and Title policy companies are making the necessary changes to mitigate their risks in today's ever changing Real Estate landscape...Mold is the kiss of death for all concerned.....good post and thank you Renee

Posted by Richie Alan Naggar, agent & author (people first...then business Ran Right Realty ) almost 8 years ago

Joan:  Believe it or not, we do have mold in the desert!  Slow leaks (from what I understand since I am not a mold expert) are usually the source for it to grow.  Generally from improperly plumbed toilets that I have seen here!

Richie:  You summed it up with the words "kiss of death"!

Posted by Renée Donohue, Las Vegas Real Estate Broker - www.urLVhome.com (Savvy Home Strategies Realty, LLC-REALTOR®-Estate-Probate) almost 8 years ago

You come up with some brilliant series, Renee!  I am excited to read the ones coming up.  I have had several deals almost go kerplunk due to slow "hidden" leaks - yikes!!!  Wasn't fun!

wake forest nc house chick

Posted by Leesa Finley, RED Properties - Raleigh NC Real Estate (RED Properties) almost 8 years ago

I too would have thought mold would be the least of your worries in your area Renee. Great series, well done!

Posted by Cynthia Bartch, Redesigned Spaces; All Round Nice Gal (Home Stager/Property Stylist & more! Granville, Ohio) almost 8 years ago

Renee: Great topic and I'm sure the series will be awesome and very educational.

Posted by Maria Marriott, Realtor - DBRealEstateTeam.com (Executive Properties) almost 8 years ago

Leesa:  And there usually isn't an easy remedy also!

Cynthia:  Still a worry :)

Maria:  Thanks!

Posted by Renée Donohue, Las Vegas Real Estate Broker - www.urLVhome.com (Savvy Home Strategies Realty, LLC-REALTOR®-Estate-Probate) almost 8 years ago

Hi Renee, I'm headed for the reblog button. I have been talking with my buyers about this a lot lately. This is a great topic for home buyers to be aware of. Thanks!

Posted by Dana Voelzke, Loan Officer/ First time home buyer specialist (loanDepot (203) 733-9408) almost 8 years ago

I believe there are over 30,000 types of mold. While this may send the transaction down the tubes, it is important for the seller to know, it can be fixed. Stop the source of water, treat and clean up the mold, repair the area affected. Disclose and move on with life.

Posted by Scott Baker, Realtor Homes for Sale in Cincinnati, West Chester, Mason, OH Area (www.eHomeReports.com Coldwell Banker West Shell) almost 8 years ago

Renee -

You are so right.  If a house is bargain-priced there is often a good (i.e. bad) reason.

Posted by Jim Hale, Eugene Oregon's Best Home Search Website (ACTIONAGENTS.NET) almost 8 years ago

Yes a 203k loan is always an option although people often forget them.  Most agents won't even want their clients to look at 203k offers as they don't often under stand them.  But they are a great tool.  Hope the market slows down so that we can begin using them with frequency again and get some families into homes.

Posted by Tni LeBlanc, Realtor®, J.D., Tenacious Tni (805) 878-9879 (Mint Properties, Lic. #01871795) almost 8 years ago

Hi Renee, what a great idea for a series!  I can't imagine anything worse than a moldy mess, but I'm sure your future posts will disclose other items that will prevent financing as well. I'll stay tuned!

Posted by Mary Douglas, REALTOR, Red Feather Lakes, Colorado (United Country Ponderosa Realty, Red Feather Lakes, Colorado) almost 8 years ago

This is actually very common on termite reports.  If the real estate agent only looks at page 1 (Arizona Form) and there are no termites, a problem might not be discovered until the lender's funding department reviews the termite report.  I am speaking from personal experience because I've learned to review them right away.... the HARD way

If the termite report shows water stains or water damage, but no termites are found, this will still hold up funding because the termite report is not clear.  It's very important to review the entire document (forms may vary from state to state).  

Posted by David Krushinsky (Skyline Home Loans - NMLS 202115) almost 8 years ago

Dana:  Thanks for reblogging!

Scott:  Bueno!

Jim:  Very true also!

Tni:  One area of financing experience I don't have is the 203K - yet.  I do know enough about it that it is a viable alternative!

Mary:  Yes I have three topics out (but boring ones) Appraisal & Condo Certification.  I am now getting into the "yummy" ( I should say UGLY) stuff.  I got a whole punch list and with 2000 BPOs under my belt in the last three years plus lots of transactions (some from former team members when I had a team) I have some interesting topics with the photos to go with!

David:  Odd enough, I haven't had a termite (or pest inspection) required since 2007 on any of my VA or FHA (or any other for that matter) transactions!  This is very interesting to me and I am glad you brought it up!

Posted by Renée Donohue, Las Vegas Real Estate Broker - www.urLVhome.com (Savvy Home Strategies Realty, LLC-REALTOR®-Estate-Probate) almost 8 years ago

Renee:  I really try to encourage my buyers to get a professional and specialized inspection before even making an offer on a home with water damage.  One client didn't and just made an offer $40,000 below to justify the purchase.  Seller accepted a better offer and the damage turned out to be old and already corrected and the only thing left was cosmetic. 

Posted by Sidney Kutchuk - Realty Works Temecula Kutchuk - Realty Works Temecula, Realty Works Temecula (Realty Works Temecula) almost 8 years ago

Renee: Great subject. A continuous leak could cause mold to run wild.

I seen homes completely black inside.

Richard

Posted by Richard Stabile, Bergen County New Homes Builder Realtor (Re/Max Real Estate Limited) almost 8 years ago

Having water in ones basement is never a fun experience. I have put together a nice resource of ways to fix basement water problems to avoid any mold issues!

Posted by Bill Gassett, Metrowest Massachusetts Real Estate (RE/MAX Executive Realty) almost 8 years ago

Renee, this post makes me want to record a sound byte of how one of my long-time customers says MOLD.

IT'S MMMMMMIIIIIIIIIIILLLLLLLLLLLDDDDDDDEEEEEEEEEEEWWWWWWWWWW!!!!!!!

Or phonetically speaking "mealdoo" elongated into a 20 second vocalization.  Talk about scary!  

Posted by Kevin J. May, Serving the Treasure & Paradise Coasts of Florida (Florida Supreme Realty) almost 8 years ago

Gratz on the feature! Great informative blog post! They should simply rehab, and they will get top dollar, vs. discounting to sell to a cash buyer, and losing more money!

Posted by Ryan Case, 877-828-0710 (SCA Real Estate) almost 8 years ago

Jane:  Great example on why further investigation is always necessary!

Richard:  I had one right next door to me with two different upper level toilets leaking and "black stuff" running rampant up walls and in floorboards.  That would be the moldiest home I have ever seen!

Bill:  Basements are rare here but I did have one when I lived in the midwest!  They do have issues with leakage!

Kevin:  You ALWAYS crack me up and make me smile!

Tom:  You know that, I know that, do they know that or even care?

Posted by Renée Donohue, Las Vegas Real Estate Broker - www.urLVhome.com (Savvy Home Strategies Realty, LLC-REALTOR®-Estate-Probate) almost 8 years ago

Those 203K loans are brilliant!  They're such a great way for homebuyers to get into a house below market value and rehab to create nearly instant equity.  Mold is an issue but can also be an opportunity for the right buyer.

Posted by Bryan Robertson, Broker, Author, Speaker (Intero Real Estate) almost 8 years ago

Renee  Your post is not only informative, but evidence of in-depth knowledge of all aspects of the real estate business - your Las Vegas clients are fortunate to have you available

Posted by Karen Kruschka, - "My Experience Isn't Expensive - It's PRICELESS" (RE/MAX Executives) almost 8 years ago

Very true! Water damage has to be fixed on government mortgages (FHA, VA, and RD) and mold presents serious health issues.

Selllers need to disclose and banks need to recognize that these issues need to be addressed.

Andy Brown

Posted by Andy Brown, Best Real Estate Training in Florida (Climer School of Real Estate) almost 8 years ago

Our sales agreements (contracts) state that the buyer and property must qualify for the loan.  And for the many, many reasons you're bringing up.  Great concept for a series.  Will be following. 

Buyers will do themselves a favor when they have you as their Realtor(r).

Posted by Carla Muss-Jacobs, RETIRED (RETIRED / State License is Inactive) almost 8 years ago

Great topic, Renee. Buyers sometimes don't get it that they jumped through the hoops and got approved, but the home falls short. They just expect that the lender will finance anything. Those days are behind us for now..

Posted by David Karp, Woodstock, Marietta GA Real Estate (Peachtree Realty Group, LLC) almost 8 years ago

Renee, 

Water is so destructive.  One challenge with foreclosures or poorly maintained homes is the unknown of how much damage they have sustained while no one was looking.  We have definitely recommended our buyers walk away from homes that had too big a mold or water damage risk.

As property managers, we are always telling our tenants we want to know about any water problems immediately, so we can stop them from becoming big problems with big costs.

Excellent series idea!

All the best, Michelle

Posted by Michelle Francis, Realtor, Buckhead Atlanta Homes for Sale & Lease (Tim Francis Realty LLC) almost 8 years ago

Hi Renee -- Good advice as always.  In addition to FHA's 203(k) program, I just helped a buyer close a similar type of financing: Fannie Mae's Home Style program -- very similar to the 203k program, but even more cost effective.

Posted by Chris Olsen, Broker Owner Cleveland Ohio Real Estate (Olsen Ziegler Realty) almost 8 years ago

Bryan:  I like how you can sniff out opportunity!

Karen:  You are making me blush!

Andy:  Unfortunately they don't disclose even after a bad home inspection.  They also really don't have much inclination to fix this issue!

Carla:  Thanks, have two ongoing series and am going bonkers on what to put up!

David:  Those days are LONG gone!

Michelle:  Water is completely destructive and really can impact the value of a home too!

Chris:  That is another good alternative!

Posted by Renée Donohue, Las Vegas Real Estate Broker - www.urLVhome.com (Savvy Home Strategies Realty, LLC-REALTOR®-Estate-Probate) almost 8 years ago

Invaluable information here Renee. Kind of makes you wonder why a buyer would ever try to buy a home without buyer representation. We're here to help them avoid all the things that can make a deal go "kerplunk".

Posted by Craig Rutman, Raleigh, Cary, Apex area Realtor (Helping people in transition) almost 8 years ago

Hi Renee...thanks for the good read today.  I enjoyed it.

Patricia /Seacoast NH & ME

Posted by Patricia Aulson, Realtor - Portsmouth NH Homes-Hampton NH Homes (BERKSHIRE HATHAWAY HOME SERVICES Verani Realty NH Real Estate ) almost 8 years ago

Renee

Water damage and mold is a huge nuisance in my area. Hard obstacles toget over.

Posted by Tom Braatz Waukesha County Real Estate 262-377-1459, Waukesha County Realtor Real Estate agent. SOLD! (Coldwell Banker) almost 8 years ago


Renee,

 

Great info.  Also along with the FHA 203k renovation loans don't forget about conventional renovation loans as well as potential solutions.  You can use them for primary hime buyers, second home buyers and investors loans.  I will also be re blogging to my readers!

 

Mike

 

 

Posted by Michael Cantwell (Envoy Mortgage - NMLSR ID #644428) almost 8 years ago

Mold and water damage can definitely sideline a transaction.  The FHA 203K Renovation loan is a great solution.

Posted by Rodney Mason, FHA 203(k) & HomeStyle Renovation-AL,FL,GA,TN (On Q Financial) almost 8 years ago

Renee - This is going to be another awesome series for Las Vegas NV Home Buyers.  So many buyers think after they get pre-approved and find the house things are good to go, which is far from the case.

Posted by Michelle Gibson, REALTOR (Hansen Real Estate Group Inc. ) almost 8 years ago

Craig:  TRUE THAT!

Patricia:  Thanks for stopping by!

Tom:  I am sure with so much water and humidity nearby

Michael:  Thanks for reblog!

Rodney:  It is, can't wait to experience it from the Realtor side!

Michelle:  BINGO!

Posted by Renée Donohue, Las Vegas Real Estate Broker - www.urLVhome.com (Savvy Home Strategies Realty, LLC-REALTOR®-Estate-Probate) almost 8 years ago

I’d like to see you use a different phrase than “blow up.” After all, it’s not going to really blow up, and I just think you’re playing into the doom and gloom scenario for a transaction similar to the doom and gloom world that the media seem to be focused on right now.

Posted by Not a real person almost 8 years ago

Renee - Just curious... Water damage in the desert is quite an interesting thought. Is there a fine for excessive water damage from the water police there? :) great post

Posted by Claude Cross, Charlotte NC Homes For Sale (Homes By Cross, Inc. ) almost 8 years ago

Getting a house to closing faces many challenges these days. Water damage is one of those challenges.

Cal

P.S glad to see your cornhuskers are back to their winning ways.

Posted by Cal Yoder, Homes For Sale in Lancaster PA - 717.413.0744 (Keller Williams Elite) almost 8 years ago

You can order a report to see if there are past insurance claims.  Be careful of homes with pipe breaks, as it may indicate an overall problem with plumbing. 

Posted by Gene Riemenschneider, Turning Houses into Homes (Home Point Real Estate) almost 8 years ago

Sometimes buyers overlook things that may be a problem.  This is another way mold can prevent a sale of a home.

Posted by Tammie White, Broker, Franklin TN Homes for Sale (Franklin Homes Realty LLC) almost 8 years ago

I think I have a sign as an agent this Fall that says MOLD. Yes, the 203K is my saving grace for clients.

Posted by Cheryl Ritchie, Southern Maryland 301-980-7566 (RE/MAX Leading Edge www.GoldenResults.com) almost 8 years ago

Oh, yes, water damage can be very destructive along w/ acoompanying mold.  Great idea to have a series on this topic.  Another issue you could write about might be asbestos.  I find it a lot in the floors (asbestos tile 9x9) and it's when there is water damage where it really starts to cause a prob a sthe tiles start coming up.  But, it's a much more serious issue when it's the ceiling or roof or even the walls as that can be more airborne.

Let's catch up soon on QR code.  I can't get the image to show up.  I have home show til 6pm today and then Monday is calling people + women's council of realtors...oh, plus an appt.  But, maybe tues or later.  hopefully, it will only take a few mins.

Posted by Debbie Gartner, The Flooring Girl & Blog Stylist -Dynamo Marketers (The Flooring Girl) almost 8 years ago

I see mold often in vacant and improperly winterized homes, in our area. Alot of times people will have allergies or undesirable smell that clue them to the issue in occupied homes. Small areas are generally not too bad to mitigate easily. This has always been a good link for more information.

http://www.epa.gov/iedmold1/index.html 

Posted by Brian Persons, Certified Master Inspector (Brian Persons Front Range Home Inspections) almost 8 years ago

Renee: Excellent idea on how to use a 203k loan. I'm sure things like this occur more than people report on it and probably most of them don't even thing about "converting" to a 203k. One thing, though, on the 203k is the use of contractors. While almost any contractor may be able to do 203k work, how do you know if they are properly educated and fully knowledgeable on the intricacies and nuances of the 203k?. You can find these Certified 203k Contractors at http://203kcontractors.com . Unfortunately, there aren't any yet in Vegas. So, if you know of any contractors that would like to be or need to be properly educated and Certified for 203k work, which includes the ability to get approved by any lender, just direct them to the 203k Contractor Directory. As a Realtor®, I'm certain you understand the importance of using educated and Certified renovation experts and specialists for something as unique as the 203k.

Great post and keep up the good job disseminating these creative uses for the 203k.

Posted by Paul Welden (HomeSmart) almost 8 years ago

If only folks knew.  I do warn my buyers to limit insurance claims to the really necessary.  If you can fix it yourself, fix it yourself.

Make a claim and you're in C.L.U.E and it may raise future rates, limit your ability to get insurance, limit the ability of the property to be insured at reasonable cost when sold.

I've seen all of the above.

 

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) almost 8 years ago

Renee, this will be a good series and hope to read more in the upcoming weeiks. Congratulations on the feature.

Posted by Rebecca Gaujot, Realtor®, Lewisburg WV, the go to agent for all real estate (Vision Quest Realty, Martha Hilton, Broker) almost 8 years ago

Renee - I closed today a transaction where the FHA appraiser asked for a mold inspection. My buyer had to hire a mold inspection company to come out and issue a report. When I saw the appraisal report I thought the deal was dead. The seller worked really hard to address the problem and when we got the mold inspector out there, he issued a clean report. I learned a great deal about mold (more than I wanted to be honest). Thank you for posting this.

Posted by Jose Dias, Sell Your Home in Scottsdale-Phoenix-Peoria-Glendale-Goodyear (Home Sellers Help in Scottsdale-Phoenix-Peoria-Glendale) almost 8 years ago

Renee,

Vegas being in the desert would make many believe there are few water-related issues with houses. Not so.

Posted by Esko Kiuru almost 8 years ago

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