Tainted Chinese drywall drains Florida home values

The value of Joe and Sharon Molinaro’s $440,000 home in Bradenton, Fla., is eroding as steadily 
as the corrosive gases from Chinese drywall are eroding their HVAC unit, appliances, wiring — even Sharon’s silver jewelry. Bought in 2008, the home now has an assessed value of $197,000.

“You can make the argument that the home is worth zero,” Joe says. “Who in their right mind would buy this house with Chinese drywall in it?”

The Molinaros are among thousands of homeowners nationwide living in homes built between 2001 and 2008 with drywall imported from China. They are also among the 2,100 plaintiffs involved in a federal lawsuit against one of the manufacturers, Knauf Plasterboard Tianjin Co.

Florida leads the nation with 59 percent of reported cases, according to the Consumer Product Safety Commission.

Joe found out about his Chinese drywall from his HVAC contractor after the unit repeatedly stopped working.

“He said, ‘I don’t want to alarm you, but this air conditioner unit is completely black and corroded — that’s very consistent with Chinese drywall,’” Joe says.

He then hired a home inspector, certified by one of the national home inspection groups, who confirmed it.

By sticking with contractors he knew and trusted, Joe avoided the “bogus tests” and “quick-cure” remedies that Florida Attorney General Bill McCollum warned consumers about in a scam alert issued last year.

How to tell if it's Chinese drywall

Visual inspection of such items as air conditioner coils, wiring and the silver backing on mirrors remains the initial detection method recommended by the CPSC and the Florida Department of Health. A “rotten egg” smell is often, but not always, present.

Additional tests may involve hiring an environmental specialist to take drywall samples and send them to a lab for testing. Air testing is not yet endorsed by either the CPSC 
or the state health department.

James Booth of highly rated Britannia Building Consultants of Dunedin, Fla., says home inspectors are a good first line of defense. “We are a useful, inexpensive way to get an idea of what should be their next step,” he says.

And sometimes, it’s a false alarm. He recalls one homeowner who was convinced they had Chinese drywall because their house smelled funny.

“The house was pre-Chinese drywall era,” he says. “I was able to trace it to water penetration and a dirty air conditioner system. It had nothing to do with Chinese drywall.”

If Booth sees corrosion indicative of Chinese drywall and the client wants scientific confirmation, he says he refers them to a specialist.

Diagnosis results in Florida tax benefits

A diagnosis of Chinese drywall brings immediate tax benefits to Tampa-area homeowners.

Manatee County cut by 50 percent the appraisal value of the Molinaros home — a mixed blessing because it meant their chief asset lost half its value, but it reduced their property taxes. About 70 homeowners have sought that relief, according to the county appraiser’s office.

Hillsborough County also is offering up to a 50 percent cut 
in value to homeowners showing proof of Chinese drywall, with 
302 homeowners receiving it.

Sarasota County is offering up 
to a 75 percent cut, and about 50 homeowners have received it, says Sarasota County Property Appraiser Bill Furst. A report from a home inspector or builder will suffice as evidence, and the counties follow up with a brief inspection.

Be on the lookout for scams

Another tax benefit may be available from the Internal Revenue Service. The loss in property value 
may fall under IRS rules for casualty loss that typically apply to fire or hurricane damage, says Joel Berman, a highly rated certified public accountant in Largo, Fla.

“What they are looking for are the facts and the circumstances that show that a taxpayer’s home has had a sudden, unusual and unexpected damage and the damage was caused by Chinese drywall,” Berman says. “The key 
is you have to have expert opinion stating that your house was significantly reduced in value because 
of this problem.”

This is where scam artists may try to lure homeowners as April 15 draws near, he says.

“There will be people going out there claiming expertise that they can certify you so you can get a refund,” Berman says. “You have to be very careful of that. The IRS would scrutinize that."

Wait or remediate?

What to do with your contaminated house is one of the most difficult decisions facing homeowners. No protocol exists on how to get rid of the problem, although the CPSC as well as industry groups are trying to develop one.

“There’s a lot of feuding going on between some of the different industries that would like to have a say in the remediation process,” says Karen Scott, principal of Asset Advisors and Managers in Port St. Lucie, Fla. “Is it a mold issue? Should the mold people own it? Is it a bacterial issue? Is it a particulate like asbestos? There’s quite a clamor for ownership of this issue from many qualified and intelligent people.”

The CPSC’s latest report in December pointed to the combination of Chinese drywall and other household gases like formaldehyde from upholstery. The outcome of the federal lawsuit also may influence the protocol, she says. Court proceedings are under way in the federal lawsuit.

“I personally would hold back on any remediation,” Scott says.

One key issue is recovering your home’s market value by complying with whatever remediation standard everybody agrees upon, she says. “If I don’t follow the protocol that the market accepts, then as far as the market is concerned my house is still tainted,” she says.

Some builders are moving forward with remediation. Hillsborough County has issued about 120 permits for remediation since September, says Wayne Francis, who oversees the county’s building services division. He says the builders are taking the houses down to the studs.

The Molinaros are trying to decide what to do with their contaminated house. Their builder says the company isn’t responsible. Joe’s mortgage company granted him a 90-day moratorium on his house payment, but he will owe a balloon payment at the end of the 90 days. “It really doesn’t do anything for us,” he says.

Joe says his lawyer tells him 
to walk away from the house. 
“Do you know how difficult that 
is to actually do?” he says. “There are a lot of things that have to happen financially.”


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