What it can mean for you to buy or sell a former Grow Op
When it comes to legalization of marijuana, there are still many concerns on the table. These concerns range from taxation regulation to impaired driving charges, crime rates, and even property damages. The creation of a “Grow Op” inside a home has long since been surrounded by stigma, due to the damages it is likely to cause. With legalization rapidly approaching across Canada, many Canadians are anxiously awaiting their ability to grow up to 4 plants in their residence legally. With little precedent surrounding homes-turned-grow-ops, how will the real estate market be affected by these property changes?
First, let’s examine how the new legislation will affect homes in Ontario (and across the country). As stated earlier, Canadians in Ontario (and many other provinces) will be able to grow up to 4 plants within their homes legally. It will also be legal in Ontario to purchase live plants, from authorized distributors. With no protection at this point geared towards landlords in Ontario, it is safe to assume the same concerns they have surrounding property damages caused by marijuana plants are carried over to homeowners, and future homeowners once legalization has occurred. Many people are in the dark when it comes to the lasting damages that can be caused by growing marijuana plants in the home. These plants emit a lot of humidity and aromas. The excessive moisture can cause the growth of mold and mildew in the home, leading to respiratory problems and expensive home repairs. The aroma varies from strain to strain, meaning your house could smell like lemons or possibly rotten eggs. Although air filtration systems can be used to eliminate the aroma, these units have their own host of complications. Another issue to consider is the care these plants require. Each plant requires 12 hours of dark, and 12 hours of light. Keeping in mind the current hydro prices across Ontario, the financial implications of needing 12 hours of consistent light may break the bank. Individuals can still opt to grow their plants in their homes based on the new legislation, regardless of these issues. Further research on the property damages accrued in former grow-ops, however, may deter some from moving forward with the endeavor.
Currently, there is no public registration for homes that have been used and busted as grow-ops. Without this registry, there is little way to know if the home has a criminal past. When houses are a grow-op, they undergo significant renovations that require extensive repairs to correct. Often these damages are just covered up via cosmetic alterations, and the house is listed for sale. Former grow-ops are often difficult to sell and tend to sell for less than the surrounding homes. An example of this is seen here, where the homeowner purchased a house that needed a “bit of TLC” and then discovered that the home was used as a former grow-op. With hundreds of plants seized from the basement, the house requires almost $100,000 in repairs to fix damages, and make it safe and liveable. This case is an example where they are now left trying to determine “who is to blame,” as it the first home inspection should have detected the damages, and the fact that it was a former grow-op has to be disclosed by the realtor if it is known, every time the home is listed. There are pros and cons surrounding every home purchase, but there are often more difficulties in the purchase and resale of a house that is a former grow-op.
As previously mentioned, the extensive damages to these homes can be extreme. The home’s electrical wiring, and even it’s structural integrity can be compromised when it is used as a grow-op. The wiring is often substantially altered to power high-wattage lights needed to support the plants, and the mass amounts of humidity can cause dramatic increases in mold and mildew growth. The heavy chemicals used in a grow-op can lead to respiratory problems and allergies. Due to these problems, some of these homes require complete gutting and rewiring, which can come at substantial costs to the homeowner. Although the price to purchase a home that was a former grow-op is “reasonable,” or lower than the surrounding homes, it is typically due to the significant repair costs associated with the damages. These damages are often cosmetically hidden and left to the unsuspecting buyer.
Former grow-op homes also have a considerable stigma attached to the property. As grow-ops are big business for organized crime, these homes sell for, on average, 15-25% less than similar homes in their area. Even when these homes are knowingly purchased, there are many difficulties involved in the purchase. Firstly, banks tend not to want to finance homes that were former grow-ops due to the potential long-term losses in resale should the owners foreclose. Regardless of size, whether there was one plant or one hundred plants, everything is just lumped into the same pot – it’s a grow-op regardless of the size. Without banks financing the mortgage, buyers are looking at higher rates from subprime lenders, making the mortgage more expensive. It can also be difficult to find insurance for these homes, as there are insurers who will ultimately refuse to insure a house that has been a grow-op in the past, due to possible damages incurred. When it comes to purchasing a home that was a former-grow op, the term “buyer beware” is entirely truthfully, as resale value is still 20% lower than similar homes due to the past criminal activity. Every time the home is listed for sale, the relator must disclose the fact that it was a former grow-op. Primarily the house is painted with a black brush, and the stigma associated with that can significantly affect resale values. The substantially lower price now may not compensate for the potential long-term losses in the future.
With legalization just around the corner, there are many aspects to consider on how to account for possible property damages should individuals choose to grow plants in their residences. However, with no apparent plan set in place, it is an unpredictable time in home-owning and purchasing. There is no way to determine what damages may occur and how that may affect the real estate market in the future, without further legislation and research. More information on marijuana legalization can be found here. When it comes to whether to purchase a former grow-op, it is safe to assume that the most critical aspect is to ensure a to do a proper home inspection, and a general contractor gives an estimate on repairing the damages. Buyers beware and ensure that you’ve taken the appropriate precautions when inspecting future homes. It is safe to assume that there is good, bad, and ugly when it comes to homes turned grow-op. Buyers need to take all necessary precautions and inspections, as the more information on a home you have the easier it is to determine requirements for purchase, and resale.