Most EIFS installed on buildings today has a vulnerable surface coating as thin as a soda cracker, applied over the top of foam insulation board that has the structural density of a Styrofoam cup. Because building materials expand and contract with temperature changes, the sealants and surface coatings can crack when EIFS is not installed correctly or maintained annually.
Cracks and installation errors can allow water to enter at roof lines, around windows and doors, at wall vents, utility penetrations, railing attachments, faucets, electric outlets and wall mounted light fixtures.
EIFS isn't necessarily bad. It is a good siding choice if it is maintained--that means sealed, caulked, etc....but if it has been let go, it is a bad bad thing. Given the house was vacant for over a year, no maintenance had taken place, and the EIFS rot was very visible.
As a result, we've gone through, identified every place where there is any fault in the EIFS and replaced it with a James Hardie stucco board--these boards are actually made of compressed concrete, and don't have the same issues that EIFS do (they also give the house the insurance rating of brick).
Below are the photos of the Siding replacement in progress:





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