Purchasing moldy homes

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Tuesday, August 20, 2002

Purchasing moldy homes

Buyers must be armed with knowledge in order to profit from the deal

Corpus Christi Caller-Times...08/04/2002

Elder, Caller-Times

" Mold? Local company will purchase your mold-damaged property. "

Such ads, popping up around town, are a sign of the real estate times in

Corpus Christi. As local homeowners grow weary of wrangling with insurers

over mold repair claims, some are desperate enough to unload their

fungus-filled homes for half of what their property once was worth.

But while some entrepreneurs say there's money to be had in buying mold

homes, cleaning them and returning them to market, others have abandoned the

venture altogether after only a few months, shrugging it off as a

money-losing business.

Who's buying mold homes? , for one.

, a local businessman and former Merrill Lynch stockbroker, began

buying mold homes in February. So far he has bought five mold homes, in one

instance paying about 50 cents on the dollar for a $ 270,000 home.

looks at his business as more than just a living. He sees it as a service.

For the past year, hundreds of Corpus Christi homeowners have been dubbed

mold refugees, forced to stay in hotels and apartments while they dicker

with insurance companies on mold cleanup costs.

'They just want out'

" I give the homeowner an option. They might have small children and the kids

have been sick, and they are sick to death of the insurance company and they

just want out, " said.

buys one out of 20 mold homes he comes across, but the offers come

often. He said he's not out to take advantage of anyone. Some of the

homeowners who have sold their homes to say they were relieved to get

what he paid. They declined to be identified for this article.

The business isn't as easy as it sounds. pays cash. Few people can

get financing or insurance for these homes. has to spend money

cleaning the home. A professional firm has to make sure the home is cleared

of dangerous mold levels. He's taking on a lot of risk with the business, he

said. When he buys a home, he can't be completely sure how bad the mold

damage is. He then invests in landscaping and other repairs to prepare the

home for sale or lease.

In many cases, the homeowner doesn't see a total loss, said Glynn Praesel,

owner of Horizon Cleaning and Restoration. Because knows Praesel, he

uses Horizon to avoid getting gouged by an unscrupulous mold removal

company.

Not always total loss

Praesel said he is watching a growing number of homeowners decide to take

what cash they get for their mold-damaged properties. In some cases, the

homeowner doesn't necessarily walk away with a total loss, Praesel said.

Say a homeowner has a $ 100,000 home and it's totaled by mold. The insurance

company is willing to pay $ 70,000 to have the mold removed. The homeowner,

who owes about $ 40,000 on the property, uses some of the insurance claim

money to pay off the mortgage, and keeps $ 30,000. A company such as

' offers to pay $ 50,000 for the home. So the homeowner walks away

with $ 80,000.

" They walk away from the house and put that money somewhere else, " Praesel

said.

Praesel warns desperate homeowners to seek bids for mold cleanup jobs before

deciding to sell the house at any cost.

" I have seen a lot of companies say that a job is $ 50,000 when it's $

10,000, " Praesel said.

A third of original value

Unlike , businesswoman Sylvia G. didn't see a future in buying

mold houses. For a few months, advertised that she would buy mold

houses, but backed off when homeowners could not settle with their insurers

soon enough. Also, did not want to buy homes she'd have trouble

insuring.

" It just got to be too much, " said , who has been buying homes since

the early 1980s.

sympathizes with some of the homeowners willing to sell for bargain

prices.

In Country Club Estates on the city's south side, a couple wanted to sell a

home that in good condition would go for $ 125,000, for $ 40,000 to .

The couple had mold and foundation problems, said. But even at that

price, couldn't see a profit.

" Talk about desperate, " said. " But by the time you start fixing

everything, you lose money on it. You just have to feel sorry. You try to

help. "

still is in the business of offering quick cash for homes, but not

mold-damaged properties.

Because Serna Real Estate has advertised that it pays cash for

homes, some homeowners with mold damage have called him.

Serna, owner of the firm, said he has considered buying mold homes,

but is proceeding with extreme caution. Serna has been in the house-buying

business for 27 years. Serna has looked at some mold properties.

Be armed with knowledge

" It's a whole different way of looking at things, " Serna said. " I looked at

some. The end result is you have to have a reasonable profit while at the

same time get environmental clearance. "

Because Serna buys houses, he is getting calls from local homeowners who are

searching for the highest bidder.

" I might have missed out on a few, but I want to be cautious, " he said.

Local contractor Joe Cole recently bought a mold house for his parents. But

Cole said the business isn't for everyone, especially anyone who doesn't

know a lot about removing residential mold.

" It's a losing proposition if you don't have the proper training or

equipment, " Cole said.

Cole does see some homeowners looking for people to take the homes off their

hands.

" Insurance companies are not settling the claims correctly, leaving the

homeowners no choice but to sell their homes at a reduced amount, " he said.

said the homes he buys get a thorough cleaning.

" I've heard of people buying mold houses and not doing anything and turning

around and renting them out to mold victims, " said. " Once we're done

with a house, it's safer because we know there's no longer a problem. "

Graphic: Buying a mold-damaged home

, a local businessman, goes through the following process when

buying a mold-damaged home:

* pays cash for the home. Financing or insurance are often not

available for these homes.

* He pays to have the home professionally cleaned.

* He invests in landscaping and repairs to prepare the home for sale or

lease.

Copyright 2002 Caller-Times Publishing Company