In a good apple you sometimes find a worm – Proverb. Why is there suddenly a rash of defective building products? Do manufacturers "just not build 'em like they used to," sacrificing quality for profits? Are lawyers dreaming up building product claims to fatten their purses with class action lawsuits? Are homebuyers more aware or just more picky?

While these questions can be endlessly debated, the claims over defective building products keep rolling in, with synthetic stucco being the latest in a series. Following Mark Twain's advice to "get the facts first, you can distort them later," this article will try to get to the bottom of the synthetic stucco mess and advise Realtors® on how to handle problems.

What is Synthetic Stucco?

Over the past year or so, concerns have been raised about Exterior Insulation and Finish Systems ("EIFS"), commonly referred to as "synthetic stucco." Traditional stucco, used for
centuries in Europe and in the United States without a problem, is a cement-like substance. Traditional stucco consists of 3/8" to 1/2" of cement base troweled onto a metal lath which is fixed onto the exterior wall. An exterior finish coat is applied to the cement. EIFS, the synthetic stucco, is a multi-layered exterior wall system. The layers of EIFS typically consist of: The layers of EIFS typically consist of: (1) an insulation board made of polystyrene or polyisocyanurate foam fastened to the exterior wall surface with an adhesive and/or mechanically; (2) a water-resistant base coat applied over the insulation and then reinforced with fiberglass mesh; and (3) a hard and durable top coat.

The final product is attractive and strikingly similar in appearance to traditional stucco. In fact someone unfamiliar with synthetic stucco may not even know the difference.

The Difference Between EIFS and Real Stucco

One way to tell the difference between synthetic stucco and stucco is to simply push on the wall. If it gives a little, it is likely EIFS. Real stucco with its layer of thick cement is usually rigid. A second way is to find a spot where the stucco has been penetrated by a light fixture, vent, or some other exterior attachment. If a wire mesh (like chicken wire) is visible, it is probably stucco. If white foam board or fiberglass mesh is showing, it is probably EIFS. However, just because foam board or fiberglass is NOT showing does NOT mean the house is traditional stucco. If the EEFS was applied in accordance with the manufacturer's specifications, the penetrations may be sealed with the top coat and therefore no backing may be visible. EIFS, developed in Europe in the 1950's during the rebuilding of post-World War n Europe, was placed over masonry, damaged brick, and stone. When EIFS was introduced in the United States about 30 years ago, the system was marketed for commercial buildings. EIFS quickly became a popular and desirable building material in the residential market for a number of reasons: *EIFS is energy efficient. Placed on the outside of the building structure, EIFS adds a layer of insulation supplementing the interior insulation in the building. The result is a more energy efficient home. EIFS became popular in the residential housing market during the 1970's energy crisis because of its superior insulation value. *EIFS is flexible, attractive, and affordable. EIFS can be made in a variety of colors and textures and can be made into virtually any shape or design. Cornices, arches, columns, keystones, cornerstones, and other decorative accents which were previously out of the reach of most home buyers can be added to a home without much additional cost. *EIFS is relatively low maintenance. Generally, EIFS is resistant to fading, chalking, or yellowing, so painting is not required. Furthermore, the color is throughout the top coat so even if the surface is scratched, the same color appears. EIFS is also more resistant to mold and mildew than some other types of siding.

So What's the Beef?

EIFS first drew the national spotlight when a significant number of upscale homes with EIFS in New Hanover County,North Carolina, were found to have moisture damage. The problem has since surfaced elsewhere, including Georgia. The problem with EIFS occurs if water gets behind it. As with any exterior siding, if moisture gets behind the siding and cannot get out, the water can cause damage to the wood structure. One of EIFS's strengths, its energy efficiency, is also its Achilles' heel. Brick and other siding materials are porous enough to allow excess moisture to escape. EIFS is less porous than these other sidings, so once water or moisture gets into the systems, the water is slow to get out. The water soaks into the wood framing, causing the wood to rot. If water intrusion and moisture retention go undetected, the damage to the wood structure can cost homeowners thousands of dollars to repair. EIFS installed over masonry such as brick or stone does not have the same problem. A problem related to the moisture retention is termite infestation and damage. Termite treatments are based on the termites' need for water. Ordinarily, when termites invade property, they make tunnels to return to the soil in their quest for water. The standard treatment for termites creates a chemical barrier between the soil and the wood structure of the home. However, when water is retained in the wall of the home, the termites never have to return to the soil. They have everything they need to live, water and wood, right in the wall. The usual chemical barrier has no effect. Furthermore, EIFS typically extends down to the surface of the soil. That point of contact between the soil and the stucco is conducive to termite activity in the home. The termites tunnel through the foam boarding in the EIFS, avoiding the chemical barrier, and make their way into the wood structure of the home. Ordinarily, a termite inspector detects termite activity by looking for telltale clay tunnels on the foundation of a home. With EIFS, the tunnels can be hidden from view inside the EIFS. The termites can therefore do their damage completely undetected.

See No Evil ...

The moisture retention and termite problems sometimes associated with EIFS are not easily detected by a visual inspection. The exterior appearance of the EIFS does not necessarily show any signs of damage. Water intrusion in a home clad with EIFS is usually found where the exterior wall has been penetrated. To locate potential sources of water intrusion, examine windows, doors, roofs, deck-to-house attachments, faucet spigots, electrical outlets, and anywhere else a penetration to the exterior wall is found. Any holes in the stucco siding should be sealed. Any unsealed holes may allow water to get inside the system, so flashing and sealant are required. Water intrusion can be confirmed by a professional home inspector. Typically, the inspector will locate a dry spot on the house, usually under the eaves or gables. This dry location is used to calibrate a wet wall detector. Once the instrument is calibrated on the home, the walls are scanned to locate areas of elevated moisture without penetrating the wall. The suspicious areas are targeted for a moisture meter reading. The moisture meter actually penetrates the stucco to the wood structure. A moisture meter reading of twelve to twenty percent (12-20 %) is indicative of some water intrusion. A moisture meter reading of twenty five percent (25 %) can mean decay of the wood structure.

Addressing the Problem

Moisture Damage
If an inspection reveals water damage, repairs must be made to avoid further damage. Unfortunately, anyone who has had a roof leak knows how difficult it can be to trace the source of a water leak. The water may enter at one point but follow the joists or other paths to pool at another location. Often the offending entry point for EIFS is a window, door, or deck that was not properly flashed or sealed. However, even an unsealed faucet can create a problem. Lower moisture meter readings may require only repairing or replacing damaged or missing flashing or cracked or deteriorated sealants. Ill-fitting windows or doors may need special attention. Once the source of water entry is fixed, the wood may dry out over time. Subsequent moisture meter readings can confirm whether the remedy worked. Higher moisture readings indicate more serious structural damage. Depending on the extent of damage, the wood structure may also need to be replaced and repaired. This repair requires removal of the EIFS. A homeowner should keep records of any and all inspections and repairs related to EIFS. Remember that a picture is worth a thousand words. Photographs of (1) the damaged area (with the siding removed), (2) the area after repair (with the siding still removed), and (3) the finished repair might be helpful.


Termites
Some pest control companies have already notified customers that the termite bond will be more expensive or may be unavailable if there is EIFS to ground contact on the home. The companies are refusing to bond homes with EIFS to ground contact because the inspectors cannot detect whether termites are entering the home. Additionally, the traditional barrier treatment will not be effective where the foam board is in contact with the soil. Recently, the Georgia building code was changed to require that synthetic stucco siding not extend below ground level. Current code requires that the foam be at least 6 to 8 inches above the soil. (As an aside, any home which has foam insulation and contact with the ground provides an access point for termites.)


There is enough blame to go around . . . and around

Generally, a homeowner's policy will not provide coverage for water damage occurring over a period of time. Thus, the repair of the damage falls on the shoulders of the homeowners, who are looking for someone to blame, and hopefully, someone to pay for the repairs. Unfortunately, blame for the problems is almost as hard to pinpoint as the source of the water leak. The builders and manufacturers of EIFS point the finger at each other. Builders claim that the product is not appropriate for residential use. Others claim the manufacturers knew the product was not being used according to specifications but failed to correct the use. Pointing to statistics that say that over a quarter million homes with EIFS exist, manufacturers say the water intrusion is caused by improper application, usually by untrained builders. Both will say that homeowners must be responsible and perform maintenance to avoid future problems. Builders and manufacturers say that media attention has exaggerated the extent of the problem. In the Atlanta area, synthetic stucco has been the focus of "special reports" in both the newspaper and television. Homeowners have turned to litigation, and the judicial system may eventually resolve the dispute. Individual lawsuits and class action suits on behalf of a group of homeowners with EIFS are pending in several states, including Georgia. For now, the blame has not come to rest, so the responsibility for the repairs rests with the homeowner.

The Duty of Brokers

The Brokerage Relationshipsin Real Estate Transactions Act ("BRRETA") clearly places a duty on a broker to disclose "... all material adverse facts pertaining to the physical condition of the property." BRRETA does not clearly identify what is a "material adverse fact." A leaking roof is easily determined as a material adverse fact which should be disclosed. But what about living near a cellular telephone tower? While there is little scientific evidence that such towers create any health risk, some cautious buyers may decide not to live near such towers, likening them to high voltage power lines. When such decisions are based more on fear than on fact, do the conditions rise to the level of being material adverse facts? While there is no case law yet on this issue, the best way for a REALTOR(r) to avoid liability is to err on the side of disclosure in situations like cellular towers, power lines, or synthetic stucco where there is the perception of a problem. In the meantime, the lawyers and scientific community debate whether the condition
truly rises to the level of a defect.

What does the GAR form provide?

GAR recommends disclosing whether a home has synthetic stucco. The GAR Purchase and Sale Agreement incorporates the seller's disclosure statement, which specifically asks the seller to disclose whether the home has synthetic stucco. If the broker is using the GAR forms, disclosure requirements are met.

What if a seller does not want to disclose?

Sometimes the seller may not want to complete a seller's disclosure statement or may believe that the synthetic stucco on the home is ot a material adverse fact. The seller may even have had the house thoroughly tested and determined that no excess moisture was present. In such a case, is there still a duty on the part of the broker to disclose the condition? While this question remains unsettled, the safe answer is probably "yes," on the theory that the negative public perception of synthetic stucco and the need for special maintenance are material adverse facts.

What about a home that used to have EIFS, but doesn't anymore?

Is a seller required to disclose that the home used to have synthetic stucco when the stucco has been removed, repairs made, and the stucco replaced with brick? While a better argument can be made in this situation that disclosure is not required, the safe answer is still to err on the side of disclosure, since there could have been moisture damage to the framing caused by the synthetic stucco. Without disclosure, the seller (and the broker) may be accused of concealing such damage from the buyer.

How can a broker assist a buyer?

The GAR seller's disclosure form asks for voluntary disclosure of whether a home has synthetic stucco. Additionally, the disclosure statement asks a seller to disclose whether the property had water problems or termite problems, both of which could be associated with synthetic stucco. If these problems show up on a seller's disclosure form, that could indicate synthetic stucco is on the house or has been on the house in the past. Remember that a house with brick or other siding or even traditional stucco may have EIFS trim. If a buyer is interested in a home with EEFS, the buyer should obtain an inspection report which includes measuring for moisture intrusion. The buyer may want to add a special stipulation to allow the buyer out of the contract if the moisture exceeds recommended levels. The buyer should communicate with the pest control company who inspected and treated the EIFS home before closing. The buyer will want to know whether a complete inspection was possible and whether the pest control company will issue a termite bond at a reasonable price. If a home is new or is in the process of construction, the buyer should seek an extended warranty from the builder which survives closing that the EIFS was applied in accordance with the manufacturer's specifications.Often, if the system was not applied as directed by the manufacturer, any warranty issued by the manufacturer is void. Additionally, the manufacturers have recently developed an EIFS system which allows for drainage of water or moisture. A drainable EEFS has weep holes which allow water that gets into the system to also get out. The buyer may want to contact the Exterior Insulation Finish Systems Members Association (800/294-3462) for recommendations to follow in the construction process.


Where can I locate this article about Stucco?

Georgia REALTOR® magazine - February 1998
"Everything You didn't Want (But Need) to Know about Synthetic Stucco" by Seth Weissman

Seth G. Weissman is general counsel to the Georgia Association of Realtors(r). He is a partner in the real estate and litigation firm of Weissman, Nowack, Curry & Wilco, P.C.