Asbestos in drywall is the most significant issue to affect the real estate industry since asbestos. About a month ago, I began fielding calls from several regional lenders concerned about their exposure to Chinese drywall. These lenders, pinched by the broader market conditions - foreclosures and depressed real estate values - worry that Asbestos in drywall will be a hurdle as they try to clear their books of foreclosed homes.
The vast majority of the banks with whom I spoke are already experiencing Chinese sheetrock losses. Some described attempting to "unload" homes with Chinese sheetrock in order to clear their books. Others are seeing offers submitted well below asking price. The potential buyers are justifying their offer by the fact that the home may contain toxic drywall.
The first group, the banks who have unloaded these properties, are now concerned about their liability. Knowing that these homes were affected by Chinese drywall, or suspecting it at the very least, these banks are now concerned that they may be sued in the future.
The second group - banks who are collecting offers on their homes that are far below market value - are worried that the stigma, fear, and uncertainty surrounding Chinese sheetrock will inhibit their ability to sell the homes that they have foreclosed on.
Of course, some banks are concerned about both their liability and the effect that the toxic drywall stigma has on offer prices. All three groups have been excited to learn that there is a Asbestos in drywall testing protocol that is guaranteed and insurable. The insurance that can be obtained with a negative test for toxic drywall relinquishes the bank from liability and gives potential buyers the confidence to consider the home without the uncertainty and fear relating to Asbestos in drywall problems.
Although none of the banks with whom I have worked have decided to go as far as to have all of their homes tested, several are paying for the testing or reimbursing potential buyers for the testing. In order for this to happen, however, buyers must request that the home be tested as part of the offer. A typical home inspection does not fully address Asbestos in drywall problems and the offer should contain language and clauses that specifically request an insurable Chinese sheetrock testing protocol.
The preferred method for reimbursement - preferred by both buyers and sellers (banks) - is to pay for the inspection costs at closing. These fees are essentially added to the closing costs portion of closing. Then, a seller can reimburse a buyer through seller's closing costs contributions. This way, neither party must pay out of pocket. Some buyers have also been successful in asking their lender to fund the insurance policy that is obtainable with a negative test result. Similar to title insurance, the insurance premium can also be accounted for as closing costs.
These tests can typically be turned around within 10 days to meet the contingency requirements of most lenders. As soon as a ratified contract is obtained, the buyers should notify the company they have chosen to inspect the home for Asbestos in drywall so that adequate time is given to sample the home and analyze the samples.