Study: Mold Is Most Feared Risk
More than 75% of builders and real estate lenders have heard of a party backing out of a real estate transaction because of mold problems, according to a new poll conducted by the Environmental Assurance Group, West Hartford, Conn.
In addition, respondents familiar with mold-related incidents n commercial real estate transactions said it takes an average of $11 million to remediate a mold problem.
The survey of 40 real estate developers and banking executives was undertaken by EAG to assess mold's financial impact on the real estate market. As mold and related lawsuits have spread across the country, many builders and lenders are taking precautions to protect themselves from liability because of mold exclusions being written into insurance policies.
Charles Perry, principal of EAG and a member of the Mortgage Bankers Association mold task force, said the study confirms that "mold is costing big money.
"Since insurers fled the scene, liability claims have escalated and the devaluation of loan collateral has accelerated," Mr. Perry said in a press release.
He said mold could surpass asbestos and lead paint in its financial consequences for lenders and property developers.
More than half of the survey respondents said mold was the type of environmental contamination they feared the most in a real estate project.
Mr. Perry noted that mold has confounded property owners and developers because efforts at prevention have fallen short. And mold, in contrast to other hazards like asbestos and lead paint, can reappear just weeks after it has been scraped or sprayed away.
"For the lender, if a borrower defaults and you can't guarantee cleanup on the property, it greatly compromises your ability to get your money's worth out of the investment," he said.
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