Corpus Christi, TX – “Mold? Local company will purchase your mold-damaged property.” Such ads, popping up around town, are a sign of the real estate times in Corpus Christi. As local homeowners grow weary of wrangling with insurers over mold repair claims, some are desperate enough to unload their fungus-filled homes for half of what their property once was worth.
But while some entrepreneurs say there’s money to be had in buying mold homes, cleaning them and returning them to market, others have abandoned the venture altogether after only a few months, shrugging it off as a money-losing business.
Who’s buying mold homes? James Thomas, for one. Thomas, a local businessman and former Merrill Lynch stockbroker, began buying mold homes in February. So far he has bought five mold homes, in one instance paying about 50 cents on the dollar for a $ 270,000 home. Thomas looks at his business as more than just a living. He sees it as a service.
For the past year, hundreds of Corpus Christi homeowners have been dubbed mold refugees, forced to stay in hotels and apartments while they dicker with insurance companies on mold cleanup costs.
‘They just want out’
“I give the homeowner an option. They might have small children and the kids have been sick, and they are sick to death of the insurance company and they just want out,” Thomas said.
Thomas buys one out of 20 mold homes he comes across, but the offers come often. He said he’s not out to take advantage of anyone. Some of the homeowners who have sold their homes to Thomas say they were relieved to get what he paid. They declined to be identified for this article.
The business isn’t as easy as it sounds. Thomas pays cash. Few people can get financing or insurance for these homes. Thomas has to spend money cleaning the home. A professional firm has to make sure the home is cleared of dangerous mold levels. He’s taking on a lot of risk with the business, he said. When he buys a home, he can’t be completely sure how bad the mold damage is. He then invests in landscaping and other repairs to prepare the home for sale or lease.
In many cases, the homeowner doesn’t see a total loss, said Glynn Praesel, owner of Horizon Cleaning and Restoration. Because Thomas knows Praesel, he uses Horizon to avoid getting gouged by an unscrupulous mold removal company.
Not always total loss
Praesel said he is watching a growing number of homeowners decide to take what cash they get for their mold-damaged properties. In some cases, the homeowner doesn’t necessarily walk away with a total loss, Praesel said.
Say a homeowner has a $ 100,000 home and it’s totaled by mold. The insurance company is willing to pay $ 70,000 to have the mold removed. The homeowner, who owes about $ 40,000 on the property, uses some of the insurance claim money to pay off the mortgage, and keeps $ 30,000. A company such as James Thomas’ offers to pay $ 50,000 for the home. So the homeowner walks away with $ 80,000.
“They walk away from the house and put that money somewhere else,” Praesel said.
Praesel warns desperate homeowners to seek bids for mold cleanup jobs before deciding to sell the house at any cost.
“I have seen a lot of companies say that a job is $ 50,000 when it’s $ 10,000,” Praesel said.
A third of original value
Unlike Thomas, businesswoman Sylvia G. Perez didn’t see a future in buying mold houses. For a few months, Perez advertised that she would buy mold houses, but backed off when homeowners could not settle with their insurers soon enough. Also, Perez did not want to buy homes she’d have trouble insuring.
“It just got to be too much,” said Perez, who has been buying homes since the early 1980s.
Perez sympathizes with some of the homeowners willing to sell for bargain prices.
In Country Club Estates on the city’s south side, a couple wanted to sell a home that in good condition would go for $ 125,000, for $ 40,000 to Perez. The couple had mold and foundation problems, Perez said. But even at that price, Perez couldn’t see a profit.
“Talk about desperate,” Perez said. “But by the time you start fixing everything, you lose money on it. You just have to feel sorry. You try to help.”
Perez still is in the business of offering quick cash for homes, but not mold-damaged properties.
Because Richard Serna Real Estate has advertised that it pays cash for homes, some homeowners with mold damage have called him.
Richard Serna, owner of the firm, said he has considered buying mold homes, but is proceeding with extreme caution. Serna has been in the house-buying business for 27 years. Serna has looked at some mold properties.
Be armed with knowledge
“It’s a whole different way of looking at things,” Serna said. “I looked at some. The end result is you have to have a reasonable profit while at the same time get environmental clearance.”
Because Serna buys houses, he is getting calls from local homeowners who are searching for the highest bidder.
“I might have missed out on a few, but I want to be cautious,” he said.
Local contractor Joe Cole recently bought a mold house for his parents. But Cole said the business isn’t for everyone, especially anyone who doesn’t know a lot about removing residential mold.
“It’s a losing proposition if you don’t have the proper training or equipment,” Cole said.
Cole does see some homeowners looking for people to take the homes off their hands.
“Insurance companies are not settling the claims correctly, leaving the homeowners no choice but to sell their homes at a reduced amount,” he said.
Thomas said the homes he buys get a thorough cleaning.
“I’ve heard of people buying mold houses and not doing anything and turning around and renting them out to mold victims,” Thomas said. “Once we’re done with a house, it’s safer because we know there’s no longer a problem.”
James Thomas, a local businessman, goes through the following process when buying a mold-damaged home:
- Thomas pays cash for the home. Financing or insurance are often not available for these homes.
- He pays to have the home professionally remediated with successful post remediation test results.
- He invests in landscaping and repairs to prepare the home for sale or lease.