Children and adults alike can experience serious health problems because of lead poisoning, such as, permanent brain damage, cancer, and high blood pressure. Unfortunately, 17.6% of houses in the U.S have a potential risk of lead.
Seller-financed deals have helped many homebuyers to own homes, but they also increase the chances of lead poisoning. This blog post will discuss four reasons why seller financing increases the likelihood of exposure to lead and what buyers and sellers need to know about buying and selling properties.
What Are Seller-Financed Deals?
Seller financing is when a seller agrees to finance the purchase of their home. Buyers can then own homes that they might not otherwise be able to afford. There are many benefits for sellers who choose this option, including securing cash flow from rent on the property until it’s sold and closing costs usually paid by the buyer instead of the seller.
Seller financing is an excellent option for buyers who cannot get financing through traditional means. However, it also comes with risks that you should be aware of first, which include:
- The buyer runs the risk of being sued if they can’t pay back their loan on time or at all.
- There’s always an inherent level of risk in any financial transaction, but the seller is protected by law.
- Seller-financed deals also carry an increased risk of lead-based paint exposure.
Finding the Correlation Between Lead Poisoning and Seller-Financed Deals
1. Many Seller-Financed Deals Involve the Purchase of Older Homes
93% of homes and buildings built before 1978 had lead-based paint. That means that if you’re buying a home or building built during this period, the risk of exposure is exceptionally high, whether it’s for sale by the owner or through a real estate agent.
Old homes and buildings may not meet current safety standards, even if they were constructed after 1978.
Unfortunately, those that are under seller financing may have less stringent inspection requirements. Also, sellers and buyers may use seller-financed deals to get around legal restrictions on their deeds, which leads to an increased risk of lead poisoning. In some cases, some sellers refuse to pay for inspections that reveal lead hazards before the escrow closes.
Therefore, you need to ensure that any building on your property is inspected for safety before signing a contract on a seller-financed deal. Even if the home or building is structurally sound, it could still be an exposure risk because of the presence of lead-based paint.
Alternatively, you can try to ensure that the deal includes an inspection clause (which it should) so that you can be aware of any lead-based paint problems and solve them before buying.
2. Many Seller-Financed Deals Do Not Have a Disclosure
Many sellers want to sell their houses as cheaply as possible and do not disclose the presence of lead paint in advance. It’s so important to have a disclosure clause in your contract, which requires sellers to disclose the presence of any known hazardous materials before closing on the deal.
Furthermore, lead doesn’t always show up on inspections. One reason for this is that some homes and buildings might have older appliances or furniture containing high levels of lead, which would go undetected during an inspection.
A clause requiring sellers to disclose the presence of any known hazardous materials can protect you from potential exposure and help you make an informed decision about whether or not to move forward with a particular property.
3. Most Seller-Financed Deals are for Low-Income Families
Many sellers finance the sale to a buyer who cannot secure traditional financing because they have no income, bad credit, or insufficient cash for a down payment. In most cases, the buyers may not have:
- An attorney: As a buyer, you should at least find a lawyer before accepting a seller-financed deal. An attorney can review the contract and advise you on what to look for to protect yourself from exposure risk.
- A renovation plan: If you’re buying a home or building without an inspection clause, there must be a renovation plan of some kind before the deal moves forward. The seller might agree to contribute funds for renovations, but often this is not an option, and you don’t want to risk exposure by living in a place with dangerous levels of lead.
4. There Is No Guarantee With a Seller-Financed Deal
If you’re purchasing a fixer-upper or flipping property to resell it quickly, there’s no guarantee that any seller-financed deal will be safe from lead poisoning. That’s because investors can buy homes for low prices and resell them, but this often means that they’re not making any repairs, which could be detrimental if the buyer is unaware of potential lead poisoning risks.
Second, seller financing is generally associated with homes that have been vacant for a long time, resulting in more damage to the properties, such as peeling paint and broken pipes, which increases the risk of lead poisoning.
It’s okay to continue pursuing seller-financed deals when you’re in the market for a new home or building. However, it is essential that your attorney reviews the contract and ensures there is no risk of lead poisoning before signing on any dotted line. Make sure you do your due diligence. If your contract doesn’t include a testing clause for hazardous materials or does but still fails to mention anything about lead-based paint, abort the deal immediately.
In Closing
Seller-financed deals are great when you’re in the market for an older home. However, sign a contract with an inspection clause to reduce any potential risk of lead poisoning. Although avoiding inspections when buying a home is a hard temptation, do not take this chance because there are just too many factors working against you in seller-financed deals.
