Will the increased costs of remodeling, due to the EPA RRP Lead Rule, lead to lower real estate values for homes with lead?
For most Americans, their home is usually their largest personal investment. Now due to the RRP Lead Rule, owning a home built before 1978, loaded with lead based paint, it is more expensive to remodel or improve. Home values, already under pressure from the financial economic meltdown, foreclosures and over building are about to take a huge hit as word of the RRP Law spreads throughout the country. Once EPA enforcement is seen through, contractors start getting fined and consumer awareness improves, the costs of RRP practices will lead to lower home values.
Feedback from other industries
Throughout the year we have been told by Realtors, Mortgage Brokers, Banks, Contractors, Appraisers, Home Inspectors and Insurance Companies that the future for homes with lead includes lower values, higher costs for remodeling and more. Here we share some of the thoughts shared with us this year.
Predictions for pre 1978 homes affected by the EPA RRP Lead Rule;
- Costs to remodel with legal contractors will rise significantly.
- RRP costs passed on to consumers, will leave homeowners with less money to do desired or needed improvements.
- Appraised real estate values will go down, affecting how much banks will lend to consumers. Increased regulation of appraisers, due to the recent meltdown, will cause them to value properties with lead lower than those without. As banks figure out the true costs of RRP on properites with lead, they will expect the appraisal value to reflect this item.
- Less equity available for home improvement financing.
- Homeowners total wealth will be less.
- Lower Real Estate commissions for Realtors selling pre 1978 homes.
- Homes that are lead abated will be worth more than those with lead.
- Homeowners will seek out illegal contractors to obtain lower prices to avoid RRP compliant work.
- Illegal contractors will knowingly offer pricing without RRP practices on purpose to homeowners looking to spend less money. They may work without permits to avoid getting caught. This may lead to sub-standard work.
- Homes improved illegally will be discovered by home inspectors trained to delve into the history of improvements made to a property. Increased accountability expectations for home inspectors will force them to be more thorough.
- Homeowners who hire illegal contractors doing illegal work will risk the consequences of enforcement. EPA can shut down jobs in progress for violations and assess fines up to 37,500. The contractor may stop work and hoard funds to pay legal costs and fines leaving homeowners with unfinished projects. Their property will become the site of an EPA violation. If this information becomes public record it could stay with the property. This could be a red flag to future buyers, insurance companies and banks that there may have been other work done on the home inappropriately by this homeowner. (I know what your thinking, no way. Ever heard of Carfax or Vehix? How about HomeFax)
- The cost of RRP will cause many consumers to become Do It Yourselfer's. These consumers will join other DIY's and may be incompetent to remodel the home. New buyers of these homes will end up with the cost of repairing poorly done projects.
- Insurance companies will need to reassess the replacement coverage costs of properties they insure.
- It may be cheaper to tear the house down than remodeling the structure.
- Willingness to preserve historical structures loaded with lead may wane.
- Consumers will be more wary of buying homes with lead with or without children due to the higher improvement costs including RRP practices.
- Banks underwriting standards will require that every home is tested for lead before financing the sale.
- States, cities and towns will require that all properties be tested for lead and listed in a public data base.
- New home buyers will require a lead assessment before they buy the home.
- New home buyers will significantly lower the offer price for homes with lead.
- Realtors will want to have the home assessed for lead before they accept the listing and set the price.
- Real Estate for sale listings will be required to conclusively state if lead is present or not.
- Insurance companies will reassess liability issues for existing insureds who own properties with lead. If lead is found premiums will increase.
- Insurance companies will require homeowners that own pre 1978 multi-family homes to use RRP lead safe practices if they do the work themselves or hire Lead Certified Contractors.
- The disclosure law will be removed so homeowners can't claim they don't know if they have lead or not
The 2010 EPA RRP Lead Rule has spurred alot of debate. Time will tell if the predictions above come true in the next year.
One final thought, most industry leaders I speak with say they would like to see the EPA step up enforcement of illegal contractors and consumer education right away. They also say they would like to see the homeowner have skin in the game. Homeowners should not be allowed to hire illegals and they should not be allowed to work independent of lead safe practices.
The goals should be to protect the personal, business and property rights of consumers, employers and workers along with protecting all from the dangers of lead based paint.
"a voice for residential contractors"