Finance a Foreclosure

7 Replies

I will try to keep this short.   I have a great foreclosure deal that could net 50k after all costs or $600 per month in cash flow.  Problem is, it has mold in the basement. I am 110k short to finance all cash. My lender said they will have to have an appraisal, when the appraiser states there is a severe mold problem, the underwriter will require this be corrected before closing. The bank will not take care of as the house is sold "as is", therefore I can't get the money to purchase.

Anyone have a situation like this before?

Thanks in advance.

Solution: Find new deal.

I get it is 50k potential profit, but mold?? That could be kryptonite my friend. How much do you stand to loose if you have to try and get it done and you are wrong? Find 2 deals that will net you 25k each with no mold and sleep better.

Hi Barrett,

I would recommend asking your lender if they do "delayed financing". If they don't start calling around for one that does. Most lenders will require you to own the property for 6-12 months before refinancing. Delayed financing is where they don't have that seasoning period. You would still have to come up with the cash but you could do this with a hard money lender. Get the hard money, purchase the property cash, immediately address the mold issue and get it corrected and then have your lender finance the property. You'll lose a little bit to the hard money lender and you'll probably only be able to finance 70% max of the value. Just an option, maybe someone else will have another suggestion.



Thanks for the quick responses!

 @Jonathan, I talked to several mold removal experts and sent them pictures.  They said that mold is common place especially in foreclosures.  So they said find the source, stop it and remove the mold, not a huge deal.  Have you had experiences contrary to this?

@Eric Black  Great idea!  I have not heard of or looked into Hard Money Lenders until your suggestion.  But it looks like that may be exactly the thing I am looking for.  In the case I wanted to rent it refinancing would be a good option,otherwise it may be good to just flip and move on.  On their sites they were saying that they can close in 24-48 hours with no or low closing fees, which would be perfect.

Thanks again!

Barrett, there is also a list of hard money lenders under the Resources tab here on BP.

I would recommend getting a mold remediation company into the property to give you a quote. It can be expensive but shouldn't kill your deal. You want to be sure to go with a licensed company however so they can give you a certificate confirming that the mold is gone. That way if anything happens down the road they'll be liable.


As a distressed property general contractor, RE broker, investor and property manager who has been specializing in mold remediation, rehab foundation, drainage and structural issues for 3 decades I'd have to agree with Johnathan. 

When we are contracted by a homeowner to repair mold related damage we never give a firm quote. It's always done on a T&M basis or we don't sign a contract. I'd rather walk away from a deal than be plagued by it and worse to lose my shorts on it.

You just can't determine how much damage has been done i.e, drywall, paneling, plaster, insulation, structural components i.e. framing exterior siding and even fixtures and appliances, etc. until you've done a thorough inspection. 

This generally involves a certain degree of destructive inspection which you would be responsible of repairing unless the homeowner, bank, law firm or in some cases insurance company is willing to pay you to do the reparation of the destruction you had to administer in order to determine the degree of damage.

I've had decades of hands on experience doing these types of repair projects and many of them have ended up costing tens of thousands of dollars. Some have exceeded 50k because as we got into the project we kept discovering more and more damage i.e. dry rot, framing deterioration, decomposition, etc. 

Not trying to make a mountain out of a ant hill but these things happen more often than not. So trying to determine the ARV on a mold issue is a lot more complicated than just stainless steel appliances, new flooring, granite countertops a paint job and a new lawn which are all fixed costs that can be easily factored into an F&F..

What you think can be a clean 50k ROI could end up costing you your shorts. Take the advice of those who suggested that you get a licensed, bonded and insured mold remediaton specialist to do a complete and thorough inspectin even if it cost you a couple of grand for some rudimentary destructive inspection. It will probably be the best investment you could make on this property. Just sayin..........................

Following this thread has definitely added mold to my list of DO NOT TOUCH items.  Thank you for the very detailed feedback to Barrett.

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