Transcript of Video Blog:
Hi everyone. Rowan Smith at the Mortgage Center. Going to talk today about my favorite topic and probably my most popular one on all of my blogs, former marijuana grow ops. I want to talk about a specific program that’s come out for these because in most of my prior posts I’ve described what’s required when you’re financing a grow op. I’m going to do so today and cover the new program.
First and foremost, if you’re looking at a property that’s a former grow op it must be fixed. It must already be fixed. It’s not something that you’re going to be fixed, it has to be repaired and what we call remediated. If it’s not remediated your really only choice is to either purchase the property in cash or to purchase the property through a private lender. Usually the rates are much higher in those circumstances.
Let’s assume that the home is fixed. How do you prove that? First off, if you walk into your average bank, Scotia Bank or TD or something, you’re probably going to get declined right off the get-go if you announce that it’s a former grow op, even if it was a former grow op 10 years ago. If it shows up on the property condition disclosure statement or in any of the documentation it was a former grow op, and the seller’s under an obligation to report that, then it will probably be declined in most circumstances.
There are some lenders that I work with that offer the same rates as all the other financial institutions who have a much more open mind about former grow ops. They just want to make sure that they’re fixed and that there’s no potential problems in the future. Here’s what they want to see. First off, environmental air quality testing. Cost between $1,500 and $2,000 depending on where you get it done. There’s a couple of firms that I’d highly recommend over the rest because they’re more widely accepted amongst the financial institutions. If you need that information contact me.
You need the air quality testing. What they’re looking for is they want to see if there’s mold in the air and spores and whatnot. That will ensure that it’s a livable property. Depending on the city you’re in you may also need to get a re-occupancy permit. The city may have pulled the occupancy permit if it was a busted former grow op. Not all places are on-board with this system, though, so please speak to me if you think that may be an issue.
If the occupancy program is not in place then you’re also going to require, third, is going to be a letter from the city that confirms that your property confirms to all municipal bylaws. That’s essentially the same thing as the occupancy permit but a lot of times, in some cities, they don’t pull the permit. They’re not going to issue a letter that says the permit was never pulled. What they’re going to do is give you a comfort letter instead that says the property does not infringe on any bylaws.
Certain municipalities will also want some sort of letter from the electrical company saying things have been set back up and hooked back up to code. Again, you need to speak with me depending on the municipality you’re in. The bottom line here is that I don’t recommend trying to get these properties financed on your own. Chances are you’re going to walk in there and they’re going to either laugh you out of the property, out of the building, or they’re just not going to treat you with due respect, they’re not going to take it seriously.
Several former grow ops do have great value. They’re perfectly fine homes, especially when the grow op was out in the back garage, but to the banks if it’s in the garage or in the house or five years ago or last week, fixed or not, it’s a former grow op until you bulldoze it. That’s just the current state of the law right now.
The new program I’m talking about, effectively, if a property has been a former grow op more than five years ago and we can document that it’s been fixed and has been lived in for that period of time I have one financial institution which will waive a lot of those additional requirements I looked at. They may still want a full appraisal on the property and they’re still going to make sure you qualify under all normal guidelines. They’re still going to charge you full discounted rates but they’re not going to ask for that expensive air quality testing which often is the deal killer for many people.
Again, property must be fixed, environmental air quality, occupancy permit if it got pulled, if it did not get pulled comfort letter from the city, any other municipal bodies such as the hydro company that explains what’s been done, and chances are you’re going to need a full appraisal in all circumstances regardless. If it’s been over five years, we can chop that list down by a big amount, make it much more simple.
If you or someone you know is looking into a former grow op don’t go walking into your bank alone. Please call me. I can at least offer you solutions and suggestions on how to get this approved. There is no fee for my service so please call me. I’ll help you out. It’s Rowan Smith at the Mortgage Center.