Disclose, Disclose, Disclose!

…Or How to Avoid Realtor® Liability

by Jamie Dunsing, owner

What ever happened to Location, Location, Location? It seems as if we are in the midst of a huge change from buyer beware to agent beware.  I want to focus on one of the next disclosure issues that you will more  than likely be hearing about.

What is all this talk about mold?

The next major environmental concern appears to have raised its ugly head. You should be prepared to have a response to your client when they ask about the mold that the home inspector found in their new home. This response will have to be informed and relevant, not just a “shoot from the hip” or dismissive comment. I speak from first hand experience when I say that this is a hot topic. My company has had many clients inquire about whether or not the home inspection includes an investigation for mold. As you can imagine, an ASHI® (American Society of Home Inspectors) home inspection, which is what my company performs, does not include an investigation or test for mold. Quite frankly, we could honestly tell clients that there is mold in the home without even leaving the office. Let’s face it, mold is everywhere!

Just as you have formulated a response to UFFI insulation, asbestos, radon, lead paint, buried oil storage tanks, and the other concerns in the past, your response to mold should be in the vein of full disclosure. You need to discuss with your managing broker and attorney what you response will be when the discussion turns to mold.

What do the experts say?

According to Chicago real estate attorney Scott Stassen, mold may be “the tip of a dangerous iceberg”. In addition, he advised me to “take this issue seriously”. To date, he has not had any deals fall apart because of mold related issues. But remember, mold is directly related to moisture problems. If there is a moisture problem, there could be a mold problem. How many of us have seen a deal fall apart because of a moisture problem? Leaky basements, wet crawlspaces, bad roofs are all potential mold generators. Make sure your inspector is inspecting and discussing these potential problem areas. Failing to inspect and report on these areas could have long term harmful affects on you and your client. An inspector that does not enter attics or crawlspaces may be missing serious liability issues that can put the referring agent in jeopardy.

As disclosed in the media, insurance companies have stopped honoring claims related to mold in Texas. In an article from the Los Angeles Daily News[1], an the president of the Farmers Group of Companies, Jerry Carnahan, explained that, “If mold results from maintenance issues like leaks, flooding, condensation or humidity, the problem is the homeowner’s liability.” What this means is that the home owner may not be willing to pay for the remediation costs out of his or her pocket. Since testing and remediation methods and costs vary greatly, cleanup costs could be substantial. If the home buyer can not afford to pay for the work, they may be looking to others to help defray costs. My inspection company is in full disclosure mode over this issue. If visible mold is found, we report it. I suggest to all reading this that you do the same.

One relocation company that we subcontract to has issued a statement telling us, “If you see mold or mildew anywhere on the property, or in the home, indicate the exact location in your report. If possible, take pictures.” We are complying with this requirement. 

What’s the big deal?

One of the reasons for such varying opinions and costs is that there is not any standard for testing, reporting on or remediating mold. As you are probably aware, here in Illinois, there is a protocol for how to perform radon testing, how to perform asbestos testing, and how to test for every other environmental hazard you can imagine. Mold is a different story. There are many companies out there trying to grab a piece of the pie by performing substandard mold testing. Even worse, some of them are performing remediation work. I was told by one client that they had a quote of over $20,000 to remediate the mold in their attic. This included removing the shingles and roof decking and sanding down the rafters!  I have my doubts about this contractor’s motives.

Some recent mold cleanups involving high profile plaintiffs Ed McMahon and Erin Brockovich have resulted in hundreds of thousands of dollars in cleanup costs. As you are probably aware, Texas, a jury ruled in favor of a family and awarded them $32 million dollars. It is not a big leap to expect that an average homeowner will expect a windfall if toxic mold is found in their home.

So, is there a reliable source for information?

According to the Illinois Department of Public Health[2],  a person can be exposed to mold every day. Most problematic is that some people are more sensitive to molds than others.

These include:

  • infants and children
  • elderly persons
  • immune compromised patients (people with HIV infection, cancer, liver disease, etc., or who are undergoing chemotherapy)
  • individuals with existing respiratory conditions, such as allergies and asthma

They further say that testing is not recommended in most cases. “If you see or smell mold, testing is usually not  necessary. It needs to be cleaned up.”

In conclusion, it is my strong advice to formulate a response to your client’s questions as soon as possible. I won’t tell you what that response should be, but I can tell you that this is a hot topic among home inspectors. Most that I have spoken to have chosen to notify the client of the existence of mold and let the “experts” do the testing and remediation.

During our inspections, we stress to clients that there is no perfect house and that they should expect some problems to be found. However, they should also to be informed of important facts that could affect their decision.

[1]Los Angeles Daily News, March 17, 2002

[2]Mold and Mildew, Environmental Health.  Illinois Department of Public Health

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