FHA, the EPA and Flaking Paint - New Regulations May Increase Selling Costs

Satisfying FHA loan approval requirements for properties built before 1978 is about to get tougher and possibly more expensive thanks to new regulations from the EPA.

One of the most common flags in an FHA appraisal is flaking paint. To remedy this, the flaking paint must be sanded away and repainted. A lender's underwriting standards may require that the job be professionally done and a paid receipt provided as a closing condition. The job will also have to be reinspected by an FHA appraiser.

A professional scrape and repaint on an older home can cost $1000s. To get through an FHA appraisal write-up, one of my sellers had his 1500 sf house scraped and painted this week for about $5,000.

Thank goodness we had warm and sunny weather all last week. Four different contractors quoted the job at 50% higher if the job was to be done after April 22. The reason is that a renovation or painting contractor must now have a new EPA renovation license, at a cost of hundreds of dollars per trained and certified individual.

And this isn't just a license for the business, it's required for each individual who works as a supervisor. The EPA regulations require that a licensed and certified supervisor be on a job site at certain times and that he has trained his employees correctly. So a small painting contractor who is used to having small crews of guys stopping in at different job sites must now have a trained and licensed supervisor regularly at each site if the house was built before 1978. These small contractors are going to turn down work, slow it down, or charge more.

If you are selling an older house, get any flaking paint taken care of as soon as possible. FHA is underwriting a huge percentage of the loans in most markets, so any flaking paint is likely to come up during an FHA appraisaal. If you employ a painting contractor doesn't have proper EPA certification, it could become an underwriting issue.

Envivonmental Protection Agency: March 11, 2010- Beginning next month, federal law will require that contractors performing renovation, repair and painting projects that disturb paint in homes, child care facilities, and schools built before 1978 must be certified in the new EPA Renovation, Repair and Painting Rule (RRP) and follow specific work practices to reduce human exposures to lead.

Common renovation activities like sanding, cutting, and demolition can create hazardous dust and chips by disturbing lead-based paint, which can be harmful to adults and children. To protect against this risk, on April 22, 2008, EPA issued a rule requiring the use of lead-safe practices and other actions aimed at preventing lead poisoning. All contractors must be trained and certified by April 22, 2010.

 

Leslie Ebersole

Baird & Warner Real Estate

Call Me at (630)945-7935

 

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