Former Marijuana Grow Ops – How to Get a Mortgage on Them

Hi everyone,

I get calls all the time about the great deal that clients have found on a former grow op (past marijuana grow op). While these deals often sounds great on the surface, there is a lot more to getting financing on them than on a typical property. Watch this video blog as it explains the various issues and concerns that may arise when trying to finance a former marijuana grow op:

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Transcription of the Video Blog:

Hey everybody, I want to talk to you today about past grow-ops. At the Mortgage Centre we’ve been taking a lot of calls. Given our area in BC, sooner or later, every house seems like it’s going to have been a former grow op.

So what do you need to do if you are thinking of buying one?

First, if you are looking at the price and thinking, “this is a fantastic deal!” There is probably a reason.

If you read the Property Condition Disclosure Statement, which is something the selling agent is to provide you, it’s a very long list of “Is the property connected to public sanitary? Is the property connected to sewage? Has it been a former grow op? Has it been a former meth lab?” All these type of questions are on the property condition disclosure statement. The selling realtor will give it to you, and you should look on there and see what they’ve said.

If they’ve said no (to it being a former grow op) but you go there and the place has been completely gutted and there is no tenant, then it might be time to ask some questions and ask the inspector to have a look around if he has the time.

But if they do disclose it, and they tell you “yes it was a former grow op”, BUT the grow op was confined to the shed, or confined to one room in the basement to any bank looking at that:

1. There is now way to prove it!
2. Who cares where it was confined to?

The type of damage the banks are concerned with are:

1. Structural
2. Chemical
3. Air quality

So how do you make the banks happy?

First off, a lot of banks just won’t do it. Period. A former grow op that says it? It dies immediately. An example of this is Scotiabank. On the flip side of that, some of the smaller credit unions: Westminster, Coast Capital, and these guys, they WILL do former grow ops, but they’re going to insist on a slightly higher level of underwriting. So what I mean by that is they are going to look much harder at that property to make sure it is still solid. For certain, they are going to want a full appraisal. That’s number one. Number two, some of them, or most of them, are going to want a phase one environmental study. It’s simply air quality testing. So what they do is they go in, they take a sample of the air from the outside, a sample of the air from the room that had no grow op in it, and a sample from the air from the room that had the grow op. As long as their isn’t mould or contaminants found in those samples, and typically there isn’t, unless it was a massive operation where they smacked out the walls, and had chemicals running all over the place and had high humidity and water mould running all over the place, then if that’s not the case, and if it was just confined to one room; especially if it was confined to the shed, or confined to one single room, then it’s not going to be a problem.

The thing is: YOU are going to have to pay for it. The buyer. And it’s probably going to take you, you know, five days to get it put together.

So if you are looking to buy former grow op, first, get an extended subject removal period. You are going to need more time to get the paperwork put together. If it’s a good deal, there is probably a good reason for it.

Second, know which lender you are dealing with. Don’t expect to just walk into your bank and get approved for it. Some of the other banks, CIBC for example, will require a phase two environmental which includes drywall testing and material testing to make sure that their isn’t within the walls, within the ceiling, and all this. It’s much more extensive and takes generally ten days to get the results back. A couple places will do it faster if you pay more, but NOBODY does it overnight.

So, if you’re thinking of buying a former grow op, come talk to me. It’s Rowan Smith from the Mortgage Centre. I’ve done these a ton of times, and I have a lot of experience to help guide you and avoid the heartache of finding something that is so cheap and so perfect, but you can’t get a mortgage against it.

Until next time…