Need urgent help! Am I chicken?

Question

Hello,

I need some urgent help - thank you so much in advance!

We are in the process of purchasing our first rental (buy and hold), getting ready for home inspection - but we are thinking of dropping out.  Should we?

The property was built in the 1920's and no one has ever done lead testing on it, as far as we know.

Current owner did not have it tested for lead when he bought it. However the house was renovated 10 years ago.

It has probably been painted several times since then. It also has new windows.

Some of the insurance companies we requested a quote from require lead testing.

This had us call someone who did this for a living and he told us chances are he will probably find traces of lead and it might cost us several thousand dollars to test and fix, if lead is found .

Even though we might be able to find an insurance company that doesn't require lead testing, this is giving us pause and wonder whether we should go through with this or drop?

The seller is firm on the price (because seller's market and all the jazz, shark fest out there) and the house is already occupied by a renter so we can't just kick them out to do lead testing and fixing, even if we consented to pay for it out of pocket, without any extra negotiation.

If we go through, we are afraid we are exposing ourselves for liability.

My husband thinks this is OK - but I am chicken.

Am I overreacting? Should we go trough? Should we drop?

Any quick advice is greatly appreciated as our real estate agent and lender are waiting for us to move forward!

Cristina S. · Answer

@Cristopher,

Thank you for your view. We were trying to figure out if what you said would be an option.

Because this is the only way we could go through with this purchase as we can't start an epic renovation now just to  make this house 100% lead-free.

We just want to be in compliance with the law and follow safety precautions.

The alternative would be backing out.

The house looks promising from an investment perspective - or at least as promising as it can be in this seller's market where most houses sell for prices where the rent is barely large enough to cover all foreseen expenses, let alone leave you with a steady cash-flow, profit.

This one looks like it will allow us to get some decent cash-flow after all expenses, fixed and anticipated (including capital expenditures, vacancy etc) are accounted for.

In this market it has been  excruciatingly difficult to come anywhere close to a deal that would meet the 1% rule. We got it off MLS which is a miracle.

To back out now because of the lead looks like a bad joke.

@Paul,

That's the thing - my mind is not made up.  I was in the edge a few hours ago, ready to back out.

My husband was OK with going forward despite the lead issue, but I almost backed out because I was not clear on the law.

I want to be law compliant and I wanted to exclude the chance that we could be sued.

Apparently, one can never exclude such a chance, only minimize odds - so I understood that.

But first and foremost, I want to be law-compliant.

Once I understood the law DOES NOT require buyers to "test for lead and fix if found" before purchase, I guess I am OK with going forward.

The law DOES requires to "disclose knowledge of lead, warn and educate tenants" - but the risk of being sued remains, as it is  impossible to remove it altogether.

If a tenant does sue - despite the fact that we took all precautions and followed the law (disclosed, warned, educated) and the tenant agreed to sign a lease despite the possible risk involved which they were made aware of - I wonder what chances would they have to win, in case it occurs to them to sue?

Maybe I am catastrophizing too much when none of this is likely to happen (my husband says) - but I am just trying to understand how much risk we are taking by purchasing under the circumstances.

Again: options are

1. "buy as is, with insurance NOT requiring lead testing"

2. "Back out".

"Test and fix" before purchase is not an option.

Thank you all so much!

Paul Evans · Answer

I don't think that anyone is ever truly protected from litigation but you sound like your mind is made up.  If you don't plan to fix now/ever then why the worry?  You state that some insurance companies don't require the testing so, go with them.   Just follow your own steps 1-3 and have a conversation with the tenant about what is going on.  They might surprise you and say "no big deal".

Christopher Phillips · Answer

@Cristina S.

Lead paint is not a big issue. It doesn't have to be removed. It can be painted over with special paint, which is called encapsulation.

Testing is also not expensive.

If the house was renovated 10 years ago, it was probably already dealt with.

Cristina S. · Answer

The renter has three children older than 6.

I understand what lead does. I also understand we can test.

But this is not what I was asking about.

I just need to know what we can do to be able to go through with this deal withoit testing/fixing now, before sale and still be be protected legally - short of buying the house, testing, finding there is some lead somewhere beneath the many layers of paint this house must have collected since the 20's (it will be for sure), kicking the renter out to fix the problem by paying a lead cert contractor to strip off all the paint (large expense).

We cannot do this now - or maybe not even later.

The seller (current owner of this house) bought in 2014 without testing and simply disclosed "I don't know".

We checked both federal and state laws and what we took away is that our responsibilities as owners and lessors are to:

1. Disclose any knowledge of lead (which in our case is "I don't know if yes or no") and include a "Lead Warning Statement" in the lease.

2. Provide the tenant with an official pamphlet that educates about lead.

3. Use lead certified contractors if doing any work/repairs/improvements.

The law does not seem to say that it is the responsibility of every buyer/owner to test for lead before buying and if found, fix it.

You can simply buy, disclose "I don't know", then educate the tenant.

Am I correct? Or still exposed to liability?

Some insurance companies may refuse coverage but others won't.

Should we go with it if we find an insurance company that does not require lead inspection?

That was my question. We do not intend to test or fix before purchase.

Possibly not even later.

Jay Hinrichs · Answer

lead killed one child... it was on one of the TV shows.  kid ate paint chips for a few months.. and it unfortunatly caused their death..

its an issue.. and I would be cautious / risk adverse personally.. but then again i don't rent houses.. I just resell them.. and the new owner does his or her inspection and the its up to them... and its why I pretty much won't fool with any house with lead or Asbestos

Sylvia B. · Answer

Your state may have more stringent requirements, but everything you need to know on a federal level is here: https://www.epa.gov/lead/real-estate-disclosure

Cristina S. · Answer

Thank you, Brett. Unfortunately, this is a bit of a Catch 22.

If we test and they find it - we probably need to move the tenant out to fix the problem.

We don't want to do this now, plus it's rather expensive if they also find lead and then we need  to fix.

We could self-test after the current tenant moves out, but it looks like she plans to be there for another 3-4 years which is a major selling point for us.  She seems like a great tenant too.

Can we buy without testing? Are we risking too much?

Seller disclosed that when he bought in 2014, he bought without testing and he never did test.

He just disclosed "I don't know".

Can we do the same thing without being afraid of having the living lights sued out of us?

If we disclose "I don't know either" to tenant, what are our responsibilities towards the tenant?

Need urgent help! Am I chicken?

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