House From Hell: Buyers' Nightmare Homes

March 8, 2013— -- The Hankins family had been saving for five years when they saw a starter home for sale for only $35,000.

They jumped at the chance and purchased the home in the foothills of southern Oregon's Cascade Mountains.

"One of my favorite memories was painting Ezra's room green, and he wanted to help so he helped dad," Jonathan Hankins told ABC News. "This is our home, this is great. It seemed too good to be true."

The house was a foreclosure advertised "as is." The Hankinses took out a loan instead of a mortgage and had a carpenter friend check it out instead of spending money on an inspector.

"We knew there were a couple of broken windows. We knew the furnace was probably on its way out," Hankins said. "Overall, the house had great bones. Little did we know that those bones would be contaminated and poisonous."

After weeks of sanding, priming, plumbing and painting, Hankins started getting dry mouth, nose bleeds and sinus headaches, and the house had a strong urine odor. Their dream house appeared to be making them sick.

Turns out the little starter had a secret past. It was once used as a meth den, and all the dangerous chemicals had seeped into the floors and ceiling.

"We ordered a test kit which only cost us $50," Hankins said. "The results came back at nearly 80 times our state's lowest level of contamination."

It's been seen before on the AMC drama "Breaking Bad." The hit show follows meth dealers who use a super lab with ventilation. But in the real world, "home cooking" all those dangerous chemicals leaves behind such high levels of poison, you have to put on hazmat suits to conduct a standard test.

Months later, the meth residue was still there.

"Contractors that specialize in clandestine meth lab clean-up have quoted us costs that are more than what the house is even worth," Hankins said.

Lawyers told them to walk away quietly because it's only illegal to sell a house with a problem if you know there is a problem.

"It's horrifying," Hankins said. "It's like a nightmare, you know, a home buyer's nightmare."

The Hankinses said the seller, Freddie Mac, should have known about the danger and that meth residue should require a warning, like lead paint and asbestos.

"It's very easy for them to come in and say, 'Well, we didn't live there, so we have no knowledge of it," Hankins said. "They didn't know some of those homes may be contaminated.

"The Hankins chose to forgo a home inspection or any other environmental test and bought the home in 'as is' condition," Freddie Mac said in a statement to ABC News. "We empathize with the Hankins [family] but neither we nor the listing agent had prior information about the home's history."

Real estate mogul Barbara Corcoran said buyers can't depend on the government, their leader or the seller to warn them.

"All Jonathan and Beth had to do was talk to the neighbor before they bought that house," she said. "Every neighbor who's next door to a meth house knows what's going on. They see the cops coming in. Or you could go the police station, talk to the police."

Freddie Mac may have not known what was in the house, but the local police department did. Officers went to the home 34 times while the previous owner lived there.

"We've been to this house several times," Chief Jim Hunter said. "We made undercover narcotics buys on at least three occasions."

The Hankins story is shocking, just like the story of Dr. Harold and Millie Mendelsohn, whose sprawling, six-acre estate in tony Pound Ridge, N.Y., carries an invisible sizzle.

Their neighbors include actor Richard Gere -- and one humungous power station.