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(The following report by George Warren appeared at www.News10.net on September 21, 2010. For pictures and video, visit: http://www.news10.net/news/local/story.aspx?storyid=96783&catid=29.)

PARADISE, Calif. — They don’t build houses like they used to– and sometimes that’s a good thing. A couple that bought a bank-owned home built in 1945 has discovered the house was made of salvaged railroad ties.

“I would guess from a lot of research those are about 1935 railroad ties,” said Mike Ledbetter as he peered at the side of the house exposed by the addition of a dual pane sliding glass door.

Ledbetter, 47, and his wife Daphne closed escrow on the house on Red Hill Way in Paradise last December. They first realized the exterior walls were composed of stacked railroad ties when they began remodeling in March.

The exposed ties show marks left by rails and holes from the spikes.

Ledbetter said the unorthodox construction material didn’t seem to pose a problem until summer heat brought eye-watering creosote vapors inside the home. “If you walked the railroad tracks as kids playing by trains, you would know the smell,” he said.

Although various websites tout the benefits of building homes with railroad ties, the Environmental Protection Agency says creosote is a suspected carcinogen and there are no approved residential uses of lumber treated with creosote.

Property records show the house was repossessed by the Federal Home Loan Mortgage Corporation (Freddie Mac) in June, 2009. The Ledbetters bought the home from Freddie Mac for $65,000 cash six months later.

Lenders are exempt from many of the real estate disclosures required by state and federal law.

“Because they foreclosed and didn’t live in the place, they didn’t know anything about it,” Ledbetter said. “So they can walk away from it with their hands clean.”

The Ledbetters’ experience points out the importance of a thorough home inspection, especially when the transaction involves bank-owned property.

Photographs recently taken under the house reveal the railroad ties. A home inspection almost certainly would have done the same thing.

Ledbetter said the couple chose not to order a home inspection because they thought the pest report paid for by the seller would be adequate. “We were trying to save money,” he said.

Ledbetter said he’s exploring several options to deal with the smell, including disassembling the house and selling the ties as landscaping material.

The old house could be replaced with a manufactured home on the half-acre property. “I really like the lot,” Ledbetter said.