Buying a Former Grow Op

Buying a former grow-op home is a tempting investment due to the lower prices compared to similar properties. However, weighing the pros and cons carefully is crucial, as several factors must be considered.

One of the primary concerns with such properties is the enduring stigma attached to them. Even if a grow-op has been remediated and is perfectly habitable now, this stigma can persist in the minds of potential buyers and lenders. In today's climate of conservative lending practices, securing financing for such homes can be challenging.

In the past, more lenders were willing to offer mortgages for remediated grow-ops. However, the number of lenders willing to provide such financing has significantly dwindled due to stricter regulations and changes in the mortgage industry. Only a handful of credit unions in British Columbia and a few private lenders may consider such properties.

You must be prepared for some added costs if you purchase a former grow-op home through one of these lenders. In most cases, they require mortgage insurance (CMHC or Genworth), which means you'll have to factor in the premium added to your mortgage.

Additionally, you can expect an interest rate increase of 0.50% to 1.00%, along with possible lender fees.

Another critical aspect to ponder is the re-sale marketability of the property. Potential future buyers may have different sentiments even if you are comfortable with the stigma. This can make selling the property more challenging, and it may affect the property's value.

If you've stumbled upon a former marijuana grow-op property that seems like an absolute steal, you might wonder if it's possible to finance it. The answer is yes, but there's more to it than your typical home purchase. We will walk you through the steps and considerations in financing a former grow-op home.

Step 1: The Air Quality Test

Before any lender considers financing a former grow-op property, they'll want to ensure it's safe for habitation. This is where an air quality test comes into play. You'll need to hire an environmental firm.

The firm will conduct air sampling in both the area where the grow-op was located and a part of the house untouched by cultivation. This provides a comparison to determine if there are any issues, such as mould or chemical residue. Most of the time, these reports come back without problems. However, if there were significant moisture issues during the grow-op days, further remediation may be necessary to satisfy the lender's requirements. 

Step 2: The Appraisal

Another essential step in the process is a full appraisal. Lenders want to ensure that the property's market value hasn't been adversely affected by its former status as a grow-op. Lenders want to be sure that the property is still a sound investment.

Step 3: Confirmation from the City

Depending on the municipality where the property is located, you'll need to provide documentation from the city. This could be confirmation that the occupancy permit is still valid, a re-issued permit, or a letter from the city stating that the property complies with all bylaws. This documentation assures the lender that the property is safe for human habitation.

Which Lenders Will Finance Former Grow-Ops?

You might wonder if lenders financing former grow-ops charge astronomical interest rates. The good news is that credit unions are willing to finance these properties at competitive rates. However, some major banks won't consider financing a former grow-op property under any circumstances. This is where the services of a Mortgage Broker come in handy, as we can help you explore other options.

The Reality of Former Grow-Ops

Contrary to what you might have seen in the media, not all former grow-ops are nightmares with black mould and dangerous chemicals lurking around every corner. Often, the cultivation was contained in a single room. Nevertheless, the stigma associated with these properties can be long-lasting until the home undergoes extensive renovations or is rebuilt from the ground up.

If you come across a former grow-op property and financing seems challenging, remember it's not impossible. You'll need to satisfy the lender's requirements, including the air quality test, appraisal, and documentation from the city. You can turn a former grow-op into a safe and sound investment with the proper steps and guidance. Navigate the complex financing options and find the best solution for your family's needs.

In conclusion, while the lower purchase price may be appealing, investing in a former grow-op home has challenges, including financing difficulties and potential re-sale issues.

Thorough research and expert advice are essential to make an informed decision that aligns with your financial goals and expectations.