So this is the story. Purchased a house where the tenant was being evicted. It was in fairly good condition as it had been rehabbed a few years ago so aside from the damage by the tenant it looked pretty good. I closed on the property and then turned around and offered it for sale in this hot market. I paid $115,000 and listed at $125,000. I put it under contract at $156,000 (did I mention the market was hot?). At any rate we were scheduled to close last Wed and the Saturday before that I got an email from the buyer's agent. "We are terminating the contract due to a positive test for Meth". The levels are fairly high levels but based on the environmental consultant probably did not include manufacturing just contamination from heavy use via smoking. I will be able to deal this but it'll likely evaporate most of my profit. Local law does not require disclosure if it has been properly mitigated so should be ok and at least not lose my shirt.
So my question is, how do I avoid this in the future? The "quick check" testing is about $400 per property and while it would have saved me on this property, it seems that in the long run it'll cost me more than it'll save me. What do you do to mitigate this risk?
I am familiar with meth lab signs and this place had none of them. The environmental consultants said that just smoking meth contaminates the property.
@Bill S. - What ended up happening with the property? How much did it cost to clean out? And how many micrograms was the test returning?
In Utah, it only costs about $25 for a test, although I hear they are cheaper here for some reason.
@Taylor C. so my cost to remediate including clearance sampling was about $15,000. There is a long story there. If I was to do it again. I would budget about $25K. After the property is "clean" then you have to put it back together. This little 600 sqft house cost me about another $15,000 just to repair the damage from "cleaning". All new appliances, retexture the whole interior of the house, repaint the interior of the house, new light fixtures, new furnace and duct work, and new insulation in the attic. Fortunately the flooring was hardwood and tile. In addition, there was the holding costs while doing the work. I won't knowingly tackle a meth house again without lots of profit in the deal using conservative numbers.
Also some companies idea of "cleaning" is gutting it to the studs. This was the most expensive and required the most work to put the property back together.
@Bill S. Ouch, that's pretty brutal. Sorry you had to go through that! What level of meth did the meth test return? Sounds like it was pretty bad...
@Taylor C. there are really no levels per se in Colorado. Our threshold is very low (one of the lowest in the nation). If the meth level is too high they tell me it can't be "cleaned" the material has to be removed. Also if it's been painted over, then it can't be "cleaned". In reality there is no hard line of you can clean this vs it has to be removed. Most companies that do the work, will offer two cleanings and if it fails then you pay them and start over. IMO it's a huge quagmire. I know nothing about cleaning and only people certified can be in the property so there is no way to make sure they do a good job yet you must absorb all the risk of it getting clean or not. Like I said, it's not a fun story.
Sorry you had to go through that. Denver and Salt Lake City shouldn't be too different, but every property I purchase, I pay $100 for a meth test. Not sure why it's $400 there. It paid dividends for me on one of my buy and hold properties, as I reduced the purchase price $5k, had them pay all closing costs, waited 3 months for them to certifiably mitigate the unit and pay for all carpet replacement. I didn't realize beforehand that I would need to re-texture all the walls, but if it ever happens again, would probably be able to negotiate that as well as painting. I think your first buyer that backed out missed out on a great opportunity to get the home at more of a discount.
@Andrew Dean Meth laws in Colorado are very stringent. Cleaning can only be done by contractors registered with the state. Workers must take a 40 hour class. The work is performed in an environment similar to asbestos removal (filtered negative air pressure). After that work is done then you have testing done to prove it's clean. The testing alone on this house was about $700 per round. Then the Industrial Hygienist has to write a report and give the all clear. After that the state issues a certificate of compliance and then I get to hire the people to put it back together. From what I have read Colorado has one of the highest standards for meth remediation in the nation. The first people I hired to do the work were from another state and although they were licensed in Colorado they had no idea how to do the work properly. They failed after three tries and my Industrial Hygienist told them how to do the work but they couldn't wrap their heads around how different the approach was.
Colorado requires cleaning whereas other states allow you to use chemicals that neutralize the meth. The Co thinking is that the chemicals that neutralize break the meth down into other chemicals that are also toxic. The only way to do it properly is to "wash" the meth off using special cleaners.
I can do a cheap test for about the same price as you do but it doesn't make the property an "official" meth house unless you hire an IH and the IH performs the state protocol testing regimen. Once it's "officially" tested then it has to be cleaned per state regs.
I'm not sure what you mean by "certifiably mitigate" the meth. You then mentioned they replaced the carpet which leads me to believe that carpet removal was not part of the mitigation. Here the carpet would be gone, the appliances gone and the furnace gone at a minimum. If you want to see if the meth is gone. Test a location about 2 feet up into the return air duct at both the return grate and the furnace end. I highly doubt they would pass (in Colorado) unless they were replaced.
@Bill S. That actually is pretty similar to Utah. Each county is different though, Salt Lake County is much more stringent than other counties. When you test for meth, there are certified and uncertified tests. The certified meth test costs over $1000. The uncertified costs about $100, sometimes lower, sometimes higher. I always do the uncertified tests as an investor because they're cheap but still will get the job done. If it yields high results, then you need to start the mitigation process, which is great for a buyer. They also trash all appliances and carpet, but not the furnace. I didn't do my homework and didn't realize that the appliances were going to be trashed until after I closed, otherwise I would've negotiated better.
There are companies that are half the cost that "mitigate" meth but it's not certified. It's not reported to the health department so there's not a lot of oversight. Some shady investors tend to do that to cut down on costs, and most get away with it.
You did the right thing and I believe that will pay higher dividends in the long run.
I just took a long class on Meth and rehabs, feel free to contact me.