Investing in homes with chinese dry wall? Any experience with this?

23 Replies

I use to see homes listed with CDW but the walls were still up. Now I see a lot of the homes with CDW have been gutted, usually sparing the wiring and tubs. The prices are discounted but not as much as I think they should be. My cousin own a home tainted with CDW and he got an estimate for 90k for a 2200 sq/ft home. Surely this cannot be the best deal out there.  Silly me, I have been tempted to dabble with this, however all of the contractors I ask about it say the say thing. "I can't tell you until I see the house". Some even admit to not doing a CDW home before. And of course when you are available to see the home they are not. Nonetheless, the question is has anyone had any experience rehabbing these homes? The pitfalls of such an endeavor? What was the cost of the finished job? Is there some type of chinese dry wall remediation certification needed at the end of completion? 

@Jaime Penix   The drywall is often removed in REOs now, probably to show the actual extent of damage. The guidelines for repair now say that wiring does not necessarily need to be replaced, but that electrical components such as outlets, breakers and all parts of fire detection and sprinkler systems including wiring need to be replaced, and all gas pipes and components need to be replaced. Copper plumbing should be replaced. Obviously all suspected chinese drywall needs to be removed. 

The cost? I have done my own work, but I see numbers like $25/sq ft. for chinese drywall rehabs. 

There are no licensing requirements that I am aware of, I think because the drywall itself is not considered to be a hazardous material. It just has enough accumulation of sulfuric acid to cause issues in an enclosed space. 

U.S. Consumer Product Safety Commission pamphlet provides a brief explanation of their findings.

Please note that local requirements can vary, due to code variations.

Thanks very much for your shared knowledge. It seems that is no doubt a pricey rehab. The discounts I see on them do not match. Maybe it is do it yourselfers that are being the properties.

I live in Texas and seen houses suspected with chinese drywall on Auction occupied with no inspection, Do Not Disturb Occupant. It is a criminal offense to trespass on this property is posted. Do your research on the year built, builder and subdivision and do not purchase anything without a chinese drywall inspection.

@Sandra Gibson  I want to buy the houses with chinese dry wall and hopeful remediate with resultant adequate profits

I have never heard of "chinese dry wall" can someone explain?

Yeah what's "Chinese drywall?"

I would buy property with chinese drywall also. I know some of the builders that have the issue and the subdivisions where they are located. If your numbers are right it would make great buy and hold rentals. You can have the tax roll reduced while it is being remediated and write off the repairs as a casualty loss on your taxes. 

@Elizabeth Colegrove @Matt Good  Chinese drywall or toxic dry wall is defective drywall used mostly in the early 2000 to 2007 that emits toxic sulfa entities. They tend to be corrosive to wiring/pipes/etc and reported to cause respiratory problems. Most of the use of this is in florida. Most of these defective drywall comes from China. I have read that is really difficult to know just how much defective drywall is out there because many American and other countries as well used Chinese chemicals during the exploring real state market in the early 2000s. I have been trying to catch one of these houses at a good discount but people seem to buy them at retail price minus standard remediation costs, which as both baffled and frustrated me.

I would told that the drywall is throughout the United States, however it is only toxic and reactive in high humidity. Since your in Florida I would look for a large development that has been foreclosed on by the bank and negotiate the numbers.

So how can you tell if the drywall is "toxic"?

@Sylvia B.  usually if you look at he copper and electrical fixtures you will see dark corrosion....of course someone can swindle you and replace all of the corroded looking ideas..also supposedly you can smell the sulfur odor at times...and if all that fails you can hire someone to test it

Hmmm....

It just seems so . . . unlikely.

I know here in Tampa there is an actual Chinese Drywall Permit that needs to be pulled.  There are testing specialist that test before the rehab and after.  You need to buy really cheap to make money.  The REOS I have seen that have already ripped out the old drywall seem to always have someone pay close to retail for the deal.

@Elizabeth Colegrove. and @Matt Good   During the boom in 2003-2006 there was a shortage of drywall and the builders were waiting for deliveries. US manufacturers could not keep up so many builders bought drywall from China. Entire subdivisions in Florida had Chinese drywall. My understanding is that most of the CD was in Florida and Texas. Most of the CD properties in my area are all gone and fixed up. @Sylvia B.  The drywall becomes toxic and the home smells like mold after a period of time. Can be very nasty and obvious  sometimes and other times difficult to tell. 

@Jamie Penix. There are companies that will go through the house and test every panel in the home to determine if it is toxic. Some homes are worst than others. Once remediated they will go back and give you a report that there is no CD. There are very few "experts" in identifying CD. Try to get one of those tests or find the most knowledgeable inspector in your area. I bought a home and the home inspection said no CD. When I sold it the new buyer's inspector said CD. I had one of those tests and they found 8 panels tested positive for CD. We fixed it and got the report showing no CD and sold it with no problems. 

I would stay away from CDW, I had a deal almost killed because the buyers inspector stated that the walls of the property " could have" CDW. It was never confirmed, but like

Jaime Penix stated it could cause some issues, unless you are fully gutting a property that has CDW, you might experience issues if the appraisal or inspection states CDW

@Walt Payne  it seems as though the CPSC has changed its recommendations. No longer do you have to change gas piping. I am looking at the remediation guidelines more closely now because I just landed a contract on a CDW house. It is a short sale and they want 78K for it, plus 5k for back HOA and 1.5K for attorney fee. I see places selling for 150-160k for the same type of house. When you say $25 per sq/ft, are you referring to the house living sq. feet? or the sq. feet of all the walls? 

I have had experience with only one REO that had CDW in the disclosures. It turns out that it was actually a Meth house. FNMA would not discuss it with me. The entire house was eventually leveled. Don

@Jaime Penix While I have not personally dealt with a home that had CDW, I lived in an area that had it everywhere. I have briefly looked into the regulations on how to remediate a home with CDW, only to find multiple different recommendations. I would think it really comes down to the city the house resides in. It's definitely not difficult to spot a house with CDW, the smell alone with tell you. CDW has a over abundant amount of sulfur, and if a house has it, you'll know by the rotten smell. The one thing I have heard from people that have bought CDW REO's, is that even with the house repaired properly, the CDW stigma still makes it a tough sale. I know a guy that bought 3 condos thinking he will be able to flip them, only to get stuck holding them as buyers were more concerned with the adjoining units having the CDW and the "possible" possible effects it could still have being on the other side of the wall. He ended up renting all 3 units with no problem, but still has his money locked up.

The good thing is, I've been told, is that a majority of the CDW is all 1/2", meaning the ceiling drywall does not need to be replaced. If you can find a SFH for the right price, it may be worth it, but condos/TH may be a bit tougher of a sell.

Best of luck.

@Kenneth Drysdale I can understand the stigma about CDW. My strategy could be to rent until the new folks that have no idea what chinese dry wall is come to the market. Then I sell. From what I heard all the drywall in the entire house would need to come out. 

@Jaime Penix  

Renting may be your best bet for a period of time. the condos I was referring to have sold as low as $35K for 2/2's in the 1500 sqft range, only to rent...even when substantially marked down on the open market.

I have heard from multiple people that the ceilings do not need to come out, as they are the 5/8's drywall paneling. Most of the CDW that was imported was 1/2, meaning it would only be on the walls. Ceilings are easy to tell, as you would just need to get in the attic and look under the insulation.  Your best bet is to find a local "CDW expert". If there's CDW, there'd defiantly an inspector or someone well versed with CDW in the area.  

I've done CDW house, no big deal.  Depending on the city you're in, but typically it's similar to an asbestos abatement.  If it's not demo'd already, you have to file a demo permit and get someone who has taken an asbestos class be in charge of the demo crew, they were suites.  Then you have to pay for a level 1 landfill (a bit more expensive).  You have to of course demo all of the trim, remove the cabinets (but don't demo them, just unscrew them), backsplash, etc.  No need to replace the wiring.

So the cost should be around $1 per drywall foot for demo (figure $5 per foot for the house), around $5 per heated foot give or take for new drywall install including materials, and then around $1 per heated foot for new trim, plus some odds and ends.  It isn't very expensive if you sub it out yourself but if you hire a GC, they might try to rip you off acting like it's worse than it is.

If it is known that the house has CDW, just video tape some of the demo and the installation, and take lots of pics during demo, after demo to show house down to studs, and new drywall installed.  Take some pictures of the brand names of the drywall going on and save receipts.  You can make good money off CDW houses, but the issue with the buyers is 'where there is smoke, there's fire' so assume you'll still have to take a little hit vs retail, but there is still enough spread to make good money 

If the house is built by Lennar, they may be able to help mitigate the cost. They paid for the replacement of CDW in thousands, if not tens of thousands of homes, back in 2007-2010 I believe, when this problem was first exposed.

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