Post by Mike Blank, MBC Building & Remodeling

The EPA rule requires lead-safe work practices in pre-1978 homes, including posting warning signs; using disposable plastic drop cloths; cleaning the work area with HEPA vacuuming and wet washing; and individual certification through a training course. The full rule and brochures for consumers can be downloaded from the EPA’s Web site.

A 2006 NAHB study on lead-safe work practices showed that a home was better off after a remodel than before, as long as the work was performed by trained remodelers who clean the work area with HEPA-equipped vacuums, wet washing and use disposable drop cloths.

Summary of the Rule

1. Training and Certification

As of April 2010, remodeling firms working in pre-1978 homes need to be certified. In addition to firm certification, the company must employ a Certified Renovator. When hiring a remodeler, home owners should verify the firm is certified and employs a Certified Renovator to be sure the work is completed properly.

2. Work Practices

The Certified Renovator has a number of responsibilities. The remodeler must distribute the Renovate Right brochure to the homeowner and ask them to sign the pre-renovation form several days before work begins. They must also post warning signs outside the work area and supervise setting up containment to prevent spreading dust. The rule lists specific containment procedures for both interior and exterior projects. It forbids certain work practices including open flame or torch burning, use of a heat gun that exceeds 1100°F, and high-speed sanding and grinding unless the tool is equipped with a HEPA exhaust control. Once the work is completed, the regulation specifies cleaning and waste disposal procedures. Clean up procedures must be supervised by a Certified Renovator.

3. Verification and Record Keeping

After clean up is complete the Certified Renovator must verify by matching a cleaning cloth with an EPA verification card. If the cloth appears dirtier or darker than the card, the cleaning must be repeated.

A complete file of records on the project must be kept by the certified renovator for three years. These records include, but aren’t limited to: verification of owner/occupant receipt of the Renovate Right pamphlet or attempt to inform, documentation of work practices, Certified Renovator certification, and proof of worker training.

Starting in July 2010, remodeling firms are also required to share with home owners a copy of the records created under the rule within 30 days of completing the renovation.

4. Exemptions

It is important to note that these work practices may be waived under these conditions:

• The home or child occupied facility was built after 1978.
• The repairs are minor, with interior work disturbing less than six sq. ft. or exteriors disturbing less than 20 sq. ft.
• If the house or components test lead free by a Certified Risk Assessor, Lead Inspector, or Certified Renovator.
• The homeowner may also opt out by signing a waiver if there are no children under age six frequently visiting the property, no one in the home is pregnant, or the property is not a child-occupied facility. The EPA is revoking the opt-out waiver as of July 2010. This means all remodeling work conducted in pre-1978 housing must comply with the regulation after this date.

Learn more about EPA’s lead paint rule by visiting www.epa.gov/lead/pubs/renovation.htm.

Mike Blank, CGR CAPS, President

MBC Building & Remodeling, LLC

cell: (717) 371-5136

We have all seen the car commercial where the guy is on the used car lot and says “Show me the CARFAX®” before he purchases a vehicle. A CARFAX® report provides potential buyers a vehicle’s history of ownership, titles and accidents. The report allows buyers to make an informed purchase decision and gives them confidence that they are buying what is advertised. Did you know the same type of report is available when you buy a house too?

The CARFAX® for a home is called a C.L.U.E.® or Comprehensive Loss Underwriting Exchange report. A C.L.U.E.® report shows insurance claims made on a property for the past 5 years and insurance companies use this information for underwriting homeowner insurance (See a C.L.U.E. example).

However, home buyers can also get a C.L.U.E.® report by requesting the seller to purchase a C.L.U.E. Home Seller’s Disclosure Report for $19.95. Remember that the buyer or real estate agent cannot order the C.L.U.E.® report and it only can be provided by the seller or owner. The report shows the same claim history on the property that insurance companies use but it removes all of the seller’s personal information that they would want to keep private.

If you wouldn’t buy a car without the CARFAX® report, should you buy a home without a C.L.U.E.® report? Let me know your thoughts.

Regarding a recent customer letter about Sheriff Sales, I thought I’d post my reply for the edification of the deal-hunters in training out there. These are my opinions & observations – give me a call for more detail if you’re interested!

1. Homes at the Sheriff Sale that have value will be sought after by professionals, of which there are about 4-5 at every sale. A good value consists of low outstanding loan balances, good location and acceptable condition. Those houses get bid up pretty high, and it’s absolutely critical to know your margin to a fine degree. The pros bring laptops with each auction detailed with estimated resale, top bid and other notes to help keep everything straight during the sale. You should try to attend the next one to see how things flow. One other thing – you’ll need to research and have at least 5 properties you want to invest in – because at least 2 of those will get pulled just before the sale date (due to a stay issued by the judge) and the pros will get at least 2 others from you…

2. Under a Sheriff or Tax Lien (public) sale all responsibility rests upon the purchaser to handle everything. If there’s a hidden lein or if someone needs evicted, or if there are huge water bills owed, the purchaser gets to deal with it. There’s no help from anyone in a public sale situation.

Bottom line - Public sales are very risky for first-time investors, and should only be undertaken with tremendous prior preparation and thorough funding. Only a very few of my customers ever go this direction in the end. Depending on your business goals, I’d recommend that you try to purchase either:

1) An open-market foreclosure (there are lots more out there these days – I can email you daily updates if you wish). These sales have had the title cleaned by the lender before being re-offered to the public. I sell a lot of these to investors, and the key is to be able to jump on a good one the same day. If the seller decides that there might be some more money to be milked out of a buyer, they’ll immediately announce what’s called a “highest and best” deadline for all interested parties. Again, you need to really know your numbers, be it resale or rental income vs. expenses.

2) HUD resales - every Friday watch www.hooksvanholm.com, which is the PA outlet for gov’t foreclosure sales. Not as much inventory, but the titles are clean and they make it easy. The competition can be fierce because everyone knows about this but once in a long while you can catch an opening and get a deal. The bidding is all done sealed online through an authorized broker (which I am one). Investors have to wait a week to bid but it gives you a few days to do your numbers before placing your bid – a rare convenience in this game.

Hope this helps – let me know what you’d like to go after! I can meet you for coffee some time if you’d like to go over your business plan in more detail.

Actually there are two definitions of Shadow Inventory being used today – but don’t let that be confusing.  Here they are:

1) The amount of homeowners who are likely to put their homes on the market once they perceive that things are sufficiently improved so that their property will sell in a reasonable time for a reasonable price.

2) The amount of properties that have entered mortgage delinquency, are at some stage along the foreclosure process and will carry through to ultimate resale in the market.

As you can immediately see, the first definition of “Shadow Inventory” is more emotional and harder to estimate – but we who are in the industry probably all know somebody who’s “holding off” making a move until things appear better.  I recently received this email from a client who has been hesitant to put his home on the market:

“At this time, I do not think we are considering a move. I see too many “for sale” signs that have been on lawns for more than a year. I know some of the prices the homeowners are asking and I think they are reasonable……and they are still not selling. It seems most of the home sales are under $200,000 and I am sure not going that low with my home. I guess I will wait out the economy problems.”

According to Zillow.com’s Second Quarter 2009 Homeowner Confidence Survey: “…many homeowners could be waiting on the sidelines to sell. When asked about future plans to sell, 29 percent of homeowners said they would be at least ’somewhat likely’ to put their homes on the market in the next 12 months if they saw signs of a real estate market turnaround, creating ’shadow inventory’ that could slow a recovery.”  Estimates range from 11 to 30 million homes waiting on the sidelines depending on who you read – either way a staggering number.  Reuters quoted Zillow’s Chief Economist Stan Humphries as saying “The number of homes listed officially on the market, while still at historically high levels, might be only the tip of the iceberg”.

The second form of “Shadow Inventory” in housing is attributed to homes going through delinquency and foreclosure.  Laurie Goodman of Amherst Securities and her team of analysts have done a bulk of work on this subject – watch a recent interview on just this subject:

They have been using the term “Housing Overhang” to describe what is happening.  The Amherst team used, among other sources, the data from the Mortgage Bankers Association Delinquency Survey for the second quarter 2009. To quote the MBA press release, “The combined percentage of loans in foreclosure and at least one payment past due was 13.16 percent on a non-seasonally adjusted basis, the highest ever recorded in the MBA delinquency survey”.

By the way, the numbers estimated 7 out the 56 million estimated homes in the U.S are heading for public sale…almost a year and half of real estate sales (135% to be more exact).  Can you say “lots of new inventory”?  The Amherst Study concludes “…housing overhang is the single largest impediment to a recovery in the housing market” (quoted from a Forbes article on the study).

So the “Shadow Inventory” of 7 million foreclosures being forecasted to hit the real estate market, in addition to the “Shadow Inventory” of milllions of other homeowners just itching to get their home sold, will be an imposing challenge to home prices (and appraisals, in the case of all those foreclosures).

If you’re a homeowner and your market is relatively stable at the moment, you might want to consider putting your house on the market sooner than later, or sidestep the sale altogether if you don’t really need to move.

If you’re a Real Estate pro, you should watch local and state statistics closely and be informed about the changes in inventory going on.  Another good idea is to get in tune with sheriff sales in your county (mine is Lancaster County, PA) so as to be able to explain what’s really happening to your clients and the public.

Hopefully this article has helping enlighten us to what’s being referred to when we hear “Shadow Inventory” used with regard to the homes market.

Don’t forget to check out my recent article examining the coming storm of Mortgage Delinquencies.