REO mold disclosure

10 Replies

Is this common being that the property is sold "as-is"? We just submitted an offer and "oh by the way we need you to sign...a mold disclosure/indemnification agreement".

I am simply wondering if this is customary or a red flag. We realize we are buying the property "as-is" but this will be our first home and our primary residence. I'm hoping this is just a standard disclosure and an inspection will cure my qualms but if not, I'd rather keep the couple hundred dollars :blush: .


This is pretty normal for all the REO's I've made offers on. They banks want you to know they are not liable for anything at all. Just another way to cover themselves.

Thank you! I just wanted to be sure it was a CYA thing and not a red flag.

1. It sounds like a CYA.

2. If the seller had specific knowledge of mold then they would have to disclose it. Either they are trying to say they just do not know or they are forgetting what they do know.

3. Remember that any REO is being handled by staff and the file is getting passed around. The heat or air conditioning was last turned on months or years ago. The property might not be weather tight. There can be invasions of rodents or other animals. In many communities the home has been broken into or otherwise disturbed. Some folks facing foreclosure will sabotage a home and otherwise do damage. Normally very visible but not always.

Houses take a lot of maintenance as the elements can be very harsh on a house. Any house that has been vacant

The house can be a great deal. The lender has worse than zero knowledge of its true condition in most cases. Depend heavily on your own investigation and maybe, just maybe what inspectors you hire have to say. Then dive in prepared to spend some money correcting issues that you find.

Good luck.

John Corey

Thank you John, I appreciate your insights.

The home has been vacant for a few months and is 2 years old so I guess assuming the offer is accepted, the inspection will hopefully reveal if there is indeed a problem or not.

The previous owner did indeed pull up the carpeting from the entire upstairs and took the stove which is presenting an obstacle right now as we were hoping to go FHA. However it's still in much better condition than some of the REO's we've looked at. Hopefully the only damage is that which is visible.

It is stand practice in my area for the banks clean up people to remove all carpet to prevent mold. Also, the mold disclosure agreement is normal. Unless you are sitting on a slab, you should be able to see if you have a mold issue.

Originally posted by "TC":
It is stand practice in my area for the banks clean up people to remove all carpet to prevent mold. Also, the mold disclosure agreement is normal. Unless you are sitting on a slab, you should be able to see if you have a mold issue.

Extending this a bit.

Mold is everywhere and it has always been everywhere. No one invented mold recently. What might have changed is two things.

1. Medically we not connect medical issues in specific individuals to exposure to mold. They always had the issues in some part of the population but medical science did not make such a strong link. A different way to think of it is people are overly concerned.

2. Insurance companies got his with large claims from court cases where they lost. Juries can sometimes go overboard. Hence sellers and other parties that might have liability are now doing a CYA.

Mold is natural and it can get very out of control in the right environment. It can be dealt with. Some measures are more extreme than others.

In my mind, the biggest issue to any investor is mold can hold up your deals. It scares off some buyers. It can require a clean bill of health that is expensive to obtain given the fuzzy standards or market misunderstanding.

Anyone who likes walking in the woods or working in the garden enjoys being close to mold. Those who like cheese seem to also have a warm spot in their diet for mold. Is there mold in yogurt? Where does penicillin comes from (note: I am allergic to penicillin as are many folks).

John Corey

i know this one was my fault, but just wanted to point it out.

bought a REO, with the mold disclosure.

it had mold all in the walls. we had to gut it.

get it properly inspected by an inspector who knows what they are doing, before buying.

that which does not kill me. . .

You didn't see any signs of mold before you found it in the walls and how did you discover it in the walls?

neighbor tipped me off the day after closing that the house had had mold problems.

got it inspected by a couple remediation companys, they found the problem.

had it gutted, was having it rebuilt until the contractor took off with an overly large deposit (newbie mistake).

still dealing with it, and everything else is on hold in the interim.

believe me, i have learned my lessons on this one. double hit, same house.

strive for the life

You said it right...I just looked at a REO property listed for over 5 months which is very unusal in dutchess county NY area. I went to check the house today. Open the freaking basement door and I can tell from the smell that that house must have a serious mold issues.

I took a contractor friend of mine with me and he confirmed with a another buddy who worked on this house in the past that this house has mold issues and I should not be offering more than a price of the land. And also keep in mind, it costs a lot of money(~15k), permits and time to bring down and house and build a new one.

So I be careful about mold issues.

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