Property Values and Equity Will Drop as a Result of the EPA RRP Rule

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Property Values and Equity Will Drop as a Result of the EPA RRP Rule

Home buyers, investors and realtors will likely drive awareness about lead and the new EPA RRP rule up.  But, at the same time, such awareness will drive the values of pre-1978 properties down.  If unaware of the additional considerations of risks, liability and costs related to the RRP, realtors will likely walk into a hornet’s nest. 

Some home buyers and investors use realtors acting as buyer brokers to assist them when purchasing property.  If making buying decisions based on property pricing and the costs related to bringing the properties they purchase up to par with their desires, these buyers will not be happy if they are blindsided by the RRP rule.  These buyers will also be very unhappy, and may consider legal options, if they feel their realtor should have advised them about such considerations during the buying process. 

A buyer’s willingness to purchase a property that contains lead will definitely be effected as a result of the RRP rule.  First, once word gets out, the health risks of lead paint and related liabilities will cause many buyers to bypass any consideration of pre-1978 properties.  As the supply goes up, the prices of these properties will go down.  Also, investors won’t like the added costs of owning such properties, particularly if the value of those properties is less likely to increase over time as compared to properties without lead.   This too will lower property values to a point where the value of certain properties may only be in the land they sit on, less the cost to get rid of the original lead infused structure.

As a result of the RRP rule, I predict home sellers and realtors will get into uncomfortable negotiations with buyers, and as a result, even some challenging conversations between themselves.  Let’s just say the asking price for a pre-1978 property is $280.000.  I picture scenarios where a buyer will make two different offers for that property.  One offer will be close to the buyer’s asking price, say $270.000.   But, the offer will be conditional upon testing the home for lead to confirm no lead is present.  The second offer will be much lower, say $240.000.  The second offer will reflect the additional costs and risks the buyer feels they will be assuming if the home does have lead and or the seller isn’t willing to allow testing for lead.  In the negotiations, realtors will likely become the punching bag, as buyers and sellers typically never interact, but rather the realtor acts as the middleman.  If the seller is first finding out about lead and the RRP as a result of the offer, as mentioned above, that seller might not be happy with their realtor either.

As a side note, realtors as a whole are typically much more professional and proactive than contractors.  The majority of them are also dues paying members of one single, well funded and very powerful trade association that represents their interests.  I predict that once a good number of realtors catch wind of and understand how the RRP will affect their industry; their association will be working to modify the rule in their favor.  This might be of benefit to renovators, but just as easily, it might not.