March 21, 2017

What Buyers Should Know About Former Grow-Op Houses

In the red-hot Toronto real estate market, it’s virtually impossible to find a reasonably priced home in an attractive neighbourhood. So if you come across such a property, proceed with caution. There’s a good likelihood that beneath that fresh paint job and shiny, granite countertop lies a shady past.

To put it bluntly, there’s a possibility that the house was once used as a marijuana grow operation.

A Hard-to-Shake Stigma

Even after extensive measures have been taken to remediate the property, experts say the grow op stigma can be difficult to extinguish.

Banks and insurance companies are increasingly shying away from financing and insuring former grow operations says John Greenlee, a mortgage agent with The Mortgage Centre.

In some instances, even homes that don’t deserve to be categorized as grow ops are getting tarnished with that label, making lenders hesitant to finance the purchases.

Greenlee recalls an instance where an agent was having a difficult time selling a home because police had busted the property’s tenant growing cannabis in the home roughly a decade earlier.

“It got labelled as a grow op despite the fact that there was no modifications done to the house like you would see in a traditional grow op that might have a hundred plants,” says Greenlee.

“At this place the person just had one or two plants in a pot, which would be similar to someone having a lemon tree in their house.”

Lenders Concerned of Taking a Loss

Banks are concerned that the stigma will affect the home’s resale value and make it more difficult for them to liquidate in the event that the buyer defaults on the loan and the local market – for example, the Hamilton real estate market – crashes.

“People think ‘Oh it’s no big deal, it’s just a plant or two,’ until they go talk to their bank, and then their bank goes, ‘We’re not touching that house,’” says Greenlee.

It Can Be Difficult to Insure a Former Grow-Op

Insurers are equally hesitant because of all the potential problems – from air quality issues to structural damage to pesticide contaminaton in the surrounding soil – that can occur with a former marijuana grow operation.

Brokers and sales agents are obligated to disclose anything that could affect a person’s decision to purchase a property, including if the home was formerly used as a grow op, according to the Real Estate Council of Ontario’s website.

How to Sniff Out a Former Drug Past

But in some instances it can be hard to detect a house’s illicit past, especially if some time has passed since its former grow op days.

RECO recommends hiring an outside home inspector to look for visible markers of past grow op use. These include an unusual number of roof vents, evidence that the electrical meter has been tampered with, unusual wiring on the outside of the home and dents in the front doors from the police ramming into the door.

Another dead giveaway is mold, as grow ops tend to produce high levels of humidity. RECO suggests looking for mould in the corners where the walls and ceilings meet. An environmental consultant can help detect the presence of toxic mould in the house, while an engineer can determine whether the house suffered any structural damage as a result of its illicit past.

Only once you’ve had a thorough inspection done can you gauge whether that former grow op is really a good deal or not.