HUD, LBP Inspection etc.

**BenMarco** · 07-24-2009, 01:38 PM

Hello,

My GF is in the process of buying a HUD house here in FL that was built in 1964. When we signed the contract, it was our understanding, as per the LBP Disclosure Addendum, that HUD was REQUIRED to get a LBP inspection and to deal with any issues arising from such. We told our broker while signing that we expected that inspection ASAP.

How soon is HUD required to act to procure the LBP inspection? Our broker inquired about it 3 days after HUD accepted and signed the contract and HUD simply faxed backed a copy of the LBP Disclosure Addendum with "Please Read" in big letters at the top with an arrow point to an underlined "no" in Seller has no record or reports..., which is irrelevant in our case because we are getting an FHA insured mortgage. Apparently no one at this company is aware that HUD is required by law to get an inspection, and sadly, neither is our broker. Which is odd because this is a legally binding document, is it not? And it CLEARLY states, where our broker initialed, that (emphasis mine):

Any FHA Financing Except 203(k): This property is being sold subject to FHA insured financing under any program other than a 203(k) Rehabilitation Mortgage. Upon contract execution the Seller will procure a lead-based paint inspection and will deliver the inspection report to the Selling Broker by overnight delivery service along with a paint stabilization plan and cost estimate if deteriorated lead-based paint is found and a supplemental Lead-Based Paint Disclosure Addendum.

While I'm not a lawyer, one would think that this was a 'time is of the essence' matter, especially given the 'overnight delivery' mentioned. Despite this, it appears there wasn't going to be an inspection had I not gotten involved. The M&M company said they'd NEVER had one done before because no one had ever requested one?! IT'S IN THE CONTRACT! IT'S FEDERAL LAW! That's like saying we don't have to do anything in our contract unless we are specifically requested to do so, and several times at that apparently. After calling them yesterday and explaining this to them, they called back today and said they were getting it done, but it would take 8-10 business days to get it to us. Needless to say, if we wait on the report (and repairing of anything found), and I think we are legally required to do so, we won't be able to get into the house before our next month's rent is due.

Do we have any legal recourse, or perhaps just leverage, in asking them to lower the price by what our rent payment is?

On another note, while we understand that the Property Condition Report isn't a guarantee of anything, the information contained within is still relied upon by HUD when it comes to setting the price for the property, as well as by the potential buyer when evaluating the property to make a bid. So, my next question is, can the price be renegotiated any further after the contract has been signed, due to misinformation in the PCR?

Specifically, the PCR says that 1) the HVAC system was tested and was in working condition and 2) that the house has 200A capacity, both of which we believe to be inaccurate. According to an AC technician, the fan motor on the outside unit needs replacing, and there still might be other problems which can only be uncovered after replacing the motor. This might cost anywhere from $360-600 just for the motor. With regards to the electric, our inspector told us the house only has 100A capacity, and that for a house that size, while 100A would certainly work, we might find ourselves tripping breakers quite often, and that most insurance companies like to see at least 150A service for a house that size. If we need to upgrade the electrical, he estimated anywhere from $2500-3000.

So, would HUD even consider renegotiating the price, or is that just simply something they don't do after a contract has been signed?

Also, aren't they required by law to obtain LBP inspections for homes/financing meeting the requirements stated above (i.e. pre-1978 home and FHA insured mortgage). This is Federal law, is it not, and if they haven't been getting these done, isn't someone in violation of said law? Maybe we could 'leverage' that bit of information too.

Thanks for any information you can provide.

**tucsonhomes** · 07-28-2009, 12:03 PM

The law you refer to simply requires a disclosure form (which you indicate you have) an informational pamphlet, and a 10 day right for the BUYER to inspect the property.

Your obligation to continue with the agreement, during this 10 day period, is not final and you can withdraw with no penalty.

Sellers only have the responsibility to disclose any testing that may have been done and provide copies of any reports that they may have.

**BenMarco** · 07-29-2009, 02:51 PM

Actually, the SELLER, HUD in this case, through their contracted M&M company, pursuant to federal law, IS required to conduct a LBP inspection and provide that to us. And if there were any LBP problems discovered, they are also required, again by federal law (24 CFR 35 subpart F) to abate said LBP problems and issue a clearance certificate once complete. This is all clearly stated in the contract as well as in the law. This applies to homes built before 1978 that are getting any type of FHA insured financing other than a 203(k) type loan, which has its own federally required procedures.

The M&M company finally admitted that they 'overlooked' this clause in the contract, and as soon as I stuck to my guns, so to speak, and finally made them actually re-read the contract to me right over the phone, they took the necessary steps to get the LBP inspection done, which was completed yesterday or today, and they'll have by tomorrow. It was all clear and we are good to close on the 31st. Good to know as I do have two young children that will be living in the house, and although they aren't prone to eating paint, it's still good to have the added benefit of a report that can be used in the future if necessary. Had they failed to obtain said LBP inspection, they might possibly have been subject to civil and/or criminal penalties. Our lawmakers didn't go to the trouble of enacting these laws for no reason. Had this been discovered after we had already closed the sale, we would still have to comply with the law, only we would have been stuck with paying for it. It's clear from the wording that, before closing, the responsibility for performing these actions falls on the SELLER because, by contract, we are not allowed to perform any repairs on the property until after closing.

[i]Title 24: Housing and Urban Development
PART 35—LEAD-BASED PAINT POISONING PREVENTION IN CERTAIN RESIDENTIAL STRUCTURES

Browse Previous | Browse Next
Subpart F—HUD-Owned Single Family Property

Source: 64 FR 50209, Sept. 15, 1999, unless otherwise noted.

**kg911** · 07-30-2009, 06:09 AM

As far as I know all HUD houses are sold as it. I bought a few in Buffalo, and that were the cases there. Not sure how different the law can be in Florida.

**Glennet** · 07-31-2009, 07:19 AM

Hello Ben-

Question for you.

Did your test results come back showing an absence of lead based paint - or did it come back showing the presence of lead based paint - but paint that was not cracking, peeling, or flaking and therefore deemed safe ??

Glenn

**BenMarco** · 08-01-2009, 12:31 PM

As my inspector promised, the LBP inspection came back showing lead based paint, but they said it was all INTACT, and therefore no stabalization or abatement was required. 6 cases were found that were above the acceptable levels.

I found that hard to believe seeing as how the previous owners had removed framing from the walls and whatnot and they ripped it all the way down to the drywall or whatever was underneath and there was at least one hole where a doorknob had hit it due to no doorstop. At least now I have the word of someone licensed and insured that it's safe to move into.

As for the comment that the HUD homes are sold as-is, I'll take your comment to be referring to the other problems I mentioned and not the LBP situation, because that is all clearly spelled out in the law and depending on the situation (type of financing, owner occupancy, etc.) HUD most certainly is required to stablize/abate any LBP issues.

So, to summarize, if you are buying a HUD home built before 1978 using FHA financing (other than 203(k), which has its own requirements) HUD is REQUIRED BY FEDERAL LAW to procure a LBP inspection and to deal with any problems found. Don't let some uninformed M&M govt. contractor tell you otherwise. IF you decide to go ahead and close before this is done, the responsibility of getting it done doesn't go away, it simply becomes your responsibility, including financially. This will be in your contract. MAKE SURE your M&M contractor orders the LBP inspection THE DAY THEY EXECUTE THE SALES CONTRACT so there is plenty of time to deal with anything discovered. We almost didn't do our closing because we still had not received the report when we showed up for the appointment, but it was finally emailed over to the closing agent (which he then printed out for us - 40 pages) at the last minute and the closing went through. So we're new homeowners and couldn't be happier. But do yourself a favor and avoid some stress by making sure this thing is ordered immediately upon contract execution by HUD. Simply citing your contract should be enough but if necessary also cite 24 CFR 35 subpart F. Plain as day.

One other thing. Now that WE know about LBP WE will be required to disclose all the information we have should we ever decide to sell or lease the house, including this inspection, which we'll obviously be holding on to.

I'm not positive because I haven't read over the entire legislation, but the condo we've been leasing for the last 10 or so years was built in 1972 and we never received any LBP disclosure, so our landlord might be in violation, especially since my GF has gone through two pregnancies while living here and they take cases with pregnancies/young children (under 7) very seriously.

**tucsonhomes** · 08-06-2009, 11:30 AM

If there is evidence of lead based paint, and you object, why would you proceed?

**BenMarco** · 08-17-2009, 09:49 AM

I only stated that I found it hard to believe that what I see in the house qualifies as intact. Of course, that's coming from someone who has no experience whatsoever in the field. We proceeded because someone with a license, insurance and most importantly, knowledge, said it was intact and provided documentation to support their findings.