A rotten-egg smell in a closed room. Blackened copper on the back of an outlet. An air conditioner whose coils keep failing no matter how many times it is fixed. For some homeowners, those are the clues that point to Chinese drywall. Once they suspect it, selling the house can feel like a bigger problem than the one that sent them looking in the first place.
The good news? Selling a house with Chinese drywall, or with other defective building materials, is possible. Whether you must fix it first depends on how you sell. Not always. This guide covers what problem drywall is, how it is identified, what the federal guidance says about fixing it, what you have to disclose, and how an as-is cash sale compares with remediating and listing.
This article is general information, not legal, tax, health or financial advice. Every house, state and situation differs, so talk with a licensed inspector, a real estate attorney or a tax professional about your own property.
What Is Chinese (Problem) Drywall?
Federal agencies call it "problem drywall." It gives off sulfur gases that corrode metal in a home. Some of the drywall imported from China during the building boom of the mid-2000s turned out to be a problem, and the Consumer Product Safety Commission (CPSC) ties that boom in part to the hurricanes of 2004 and 2005. Its identification guidance looks at drywall installed between 2001 and 2009. Homeowners mostly reported homes built in 2006 and 2007.
The CPSC says it received about 4,000 reports from residents in 44 states, the District of Columbia and two territories, and the majority came from Florida (see its page on where problem drywall has been reported). Not every house with corrosion has bad drywall. Not every imported sheet was a problem. Still, the reports are why the topic has its own federal guidance.
Signs Your House Might Have Problem Drywall
Residents commonly describe a few symptoms:
- A rotten-egg or sulfur smell, especially in closed spaces
- Blackened or corroded copper, such as wiring behind outlets and switches
- Air conditioner evaporator coils that corrode and fail repeatedly
- Corroded metal on plumbing, fixtures and appliances
None of these proves anything alone. Not one. CPSC's identification method works in two steps. First it looks for blackening of copper wiring or air conditioner coils in a home with drywall installed between 2001 and 2009. Then it looks for corroborating evidence, such as lab-measured sulfur or sulfide gas emissions, corrosion patterns that can be reproduced in a test chamber, or Chinese markings on the drywall. How much evidence it takes depends on when the drywall was installed.
The agency also warns that many other things can cause similar symptoms. Don't assume. Get a qualified inspector to look, and ask what evidence the inspector is using.
Health Concerns Homeowners Have Reported
Residents of affected homes have reported irritated and itchy eyes and skin, difficulty breathing and a persistent cough, along with the smell and the corrosion, and those symptoms appear in the reports CPSC has received. If anyone in your home has symptoms like these, that's a conversation for a doctor. Not a real estate article.
What You Have to Disclose When Selling
Many states require sellers to disclose known material defects, and a confirmed or strongly suspected problem drywall issue is the kind of thing that likely qualifies, though the wording of the rule, and of the form you sign, differs from state to state. Ask a local real estate attorney what yours requires.
The type of buyer changes what happens after you disclose. A buyer using a mortgage may need the issue resolved first. A cash buyer who accepts the house as-is can treat the condition as part of the price. Either way, you tell them what you know. No exceptions.
What Fixing It Involves
If you decide to remediate before selling, expect a large project. Not a patch. The CPSC and HUD staff published remediation guidance (last revised March 2013) that calls for replacing:
- All possible problem drywall in the home
- Smoke alarms and carbon monoxide alarms
- Electrical distribution components such as receptacles, switches and circuit breakers, though not necessarily the wiring itself
- Fusible-type fire sprinkler heads
It also says gas service piping should be inspected and pressure-tested. Removed problem drywall should not be reused. Work has to follow local building codes. Every bit of it. The guidance notes that some homeowners have also replaced wiring, water plumbing, air conditioner coils and other items, which it does not require on safety grounds. That can make the bill larger, and the cost depends heavily on the house.
Because the work can touch walls, electrical and mechanical systems, it usually needs licensed contractors, and it can take a long time, with the schedule set by your house, your city and the extent of the damage rather than by your closing date.
Remediate First or Sell As-Is?
A listing can bring in more money. If you have the time and the money to remediate, document the work and sell a repaired house, you may attract financed buyers and a higher price, since the buyer is no longer taking on a project. If you do not, selling as-is is the other route, and the price is below market value.
| Factor | Remediate, Then List | Sell As-Is for Cash |
|---|---|---|
| Upfront repair costs | Can be large, often a whole-house project | Not required before selling |
| Disclosure | Required where state law applies | Required where state law applies |
| Buyer pool | Financed buyers, once the work is done | Cash buyers and investors |
| Lender involvement | A buyer's lender may have its own requirements | None |
| Timeline | Remediation plus a normal listing period | As little as 21 to 42 days, or longer if you need it |
| Who manages the repair | You, before closing | The buyer, after closing |
What a Cash Sale Looks Like
Eagle Cash Buyers evaluates properties in 43 states. Whether we can make an offer on a house with suspected or confirmed problem drywall depends on the property, the title and our buying criteria. Here is how it generally goes.
No remediation before you sell. You don't have to replace drywall, wiring or anything else before the offer. Not one sheet.
Tell us what you know. Inspection notes, contractor reports, photos of corrosion, a CPSC-style assessment if you have one. More detail helps us price the property.
The offer reflects the problem. It is below what a repaired house might bring on the open market, because the buyer takes on the repair cost and the risk for as long as it takes to sort out.
No agent commission on a direct sale. Eagle pays the closing costs except your mortgage payoff, any back taxes or liens, and your share of transfer tax. You pick the closing date, and closings can happen in as little as 21 to 42 days, or longer if you need more time. Eagle may buy the property directly or assign the contract to another buyer, which is disclosed in the agreement before you sign. Our how it works page lists the steps.
Other Contaminated Building Materials
Problem drywall is one of several material issues that affect a sale. Lead paint in older homes, asbestos and water damage each bring their own disclosure and handling questions. Our guides to selling a house with lead paint, asbestos removal costs and selling a water-damaged house cover those, and our overview of selling a house as-is explains the general approach.
A Tax Note on Repair Costs
The IRS has a special procedure for damage from corrosive drywall, described in Publication 547. It lets some homeowners deduct amounts paid to repair damage from corrosive drywall. Because these losses are not tied to a federally declared disaster, the publication says they are deductible only to the extent they do not exceed your personal casualty gains. That limit can matter a lot. Talk to a tax professional before counting on a deduction.
Frequently Asked Questions
Can you sell a house with Chinese drywall?
Yes. If you sell to a cash buyer who accepts the house as-is, you do not have to remediate first. Whatever route you take, you should disclose what you know, and a real estate attorney can tell you what your state requires.
What are the signs of Chinese drywall?
A rotten-egg smell. Blackened copper wiring. Air conditioner coils that corrode and fail. CPSC says a single sign is not proof of corrosive drywall, because other problems can cause similar symptoms, and it recommends corroborating evidence such as lab testing.
Will problem drywall lower my sale price?
Generally, yes. A cash offer on a house with problem drywall reflects the repair cost and the risk the buyer takes on, so it will be lower than the price of a repaired house. A listing with the work completed and documented can bring a higher price if you have the time and the money.
Do I have to remediate before a traditional sale?
You may need to remediate or be ready to discuss it, because a buyer's lender may have its own requirements for a house with known problem drywall. That can shrink the pool of buyers until the work is done. Ask your agent and a local attorney.
Can I deduct drywall repair costs?
Possibly. IRS Publication 547 describes a special procedure for corrosive drywall damage, with limits. Ask a tax professional.
The Bottom Line
Finding problem drywall in your house is frightening and expensive. It doesn't mean you can't sell. You can fix the house and list it, or you can sell as-is and let the buyer handle the work, and the right choice comes down to your time, your budget and how soon you need to move.
If you have the time and money, remediating and listing can net more. If you do not, an as-is cash sale takes the repair project off your plate, at a price below market value, with the closing date yours to choose.
