Grow ops

[Cribs]

I have a situation that I would like to get some input on.

I have put an offer on a property which was accepted. After acceptance of the offer I found out that the property was once a grow op and was shut down in Feb/08. Have received a copy of the Capital Health effectively clearing the property as fit for human habitation dated in August 2008. I am have much difficulty in finding a mortgage on this property. Anyone have any suggestions as to who or what company may be approachable?
Thanks in advance for your input.

 

[Dan_Eisenhauer]

The reason that you are having difficulty obtaining financing is the possible long term health risk to the occupants, and possible structural damage to the home following its use as a grow op. Unless you know for certain how the bldg was remediated, run from the deal as fast as you can.
A grow-opped bldg should be stripped bare and have all the wood under the drywall treated and cleaned of mould. Not doing so leaves the threat of future health and structural damage caused by rot.

Buying a former grow-op is not worth the risk, no matter how low it is priced. There is a reason for that low price.

I had personal experience with two grow-ops as a property manager. In one case the growers opened a wall and tapped into the main power line of the owner above. After the grow-op was discovered, someone repaired that wall, and the City of Vancouver inspectors approved the unit for rehabitation. When I called the inspection department to query them about the electrical splice, they knew nothing about it.

So much for government agencies doing an adequate job!

They later came out, opened the repaired wall, and realized the error and ordered that a new cable be installed. But, had I not called there would have been a HUGE risk of fire from that splice.

DO NOT BUY A FORMER GROW OP!!!!!!!!!!!!!!!!!!!!!!

 

[vandriani]

Figures a Vancouver area resident would know about grow-ops

 

[dplummer]

As a remediation contractor I have bought & sold former grow ops. I have also cleaned them up for banks, mortgage co`s. Make sure you have an independent third party perform pre & post air quality & surface sampling. Have a remediation contractor who deals in this field perform the clean up. Once you have this documentation you should have no problem financing or selling the property. Banks won`t finance a property in it`s present state. You`ll have to find private money even short term to purchase & then obtain traditional mortgaging afterward.

Doug

 

[Dan_Eisenhauer]

My blank statement, "do not buy a grow-op". was more a warning than a statement of fact. IF you know for certain that remediation has been carried out in a manner similar to that done by Doug, there should be no problem.

My cautionary words come because a buyer cannot know how in depth the remediation was. As in my example, the authorities gave a cursory survey of the property and gave the green light for reoccupancy. I do not have faith city inspectors approving a remediation guarantees a good remediation has been done.

Having said that, there are contractors, such as Doug, who buy and do a fantastic job at remediation. I would be very cautious about buying a former GO, and would probably pass. Remember, that when you go to sell, you will also have to declare the ppty is a former GO. That is going to scare many like me off.

 

[dplummer]

A lot also depends on whether your holding on to the property or flipping. When you sell this type of property if your 10-20% below market someone will jump at a great deal. Don`t be afraid Dan it`s those challenges that get me up in the morning

Doug

 

[bigbabba]

Run from a grow-op, in most cases even the framing has mold embeded in it..not worth it at all..

 

[Mike Milovick]

QUOTE (Cribs @ Jun 25 2009, 09:08 PM) I am have much difficulty in finding a mortgage on this property.

Forget financing, where are you going to get insurance? Good luck.

There`s a good reason why they are 10 to 20% below market. You can find better value in your market place. You shouldn`t have to buy stigmatized property to reap a good return.

Also, consider disclosure issues with prospective tenants. Do you say anything? If you don`t, what if they come down with health issues.

Also, envision your end strategy. You are buying 10 to 20% below today. Where you do you think you will be selling at five to ten years out? Market?

 

[dplummer]

10-20% below market after remediation including clearance testing in my opinion is a great deal. The place is like new & no health risk issues. When the majority is running away that`s when I walk in. I have never had a problem getting a mortgage or insurance AFTER remediation.

Doug

 

[bigbabba]

I agree with Mike, spend a little more and buy something `clean`..remediation or not, that house will pose problems down the road..you will never get all the mold out of it..mold will just keep building..I woudnt want to be responsible for destroying someones health just to save a buck.

 

[sorrenson]

QUOTE (bigbabba @ Jul 2 2009, 06:27 PM) I agree with Mike, spend a little more and buy something `clean`..remediation or not, that house will pose problems down the road..you will never get all the mold out of it..mold will just keep building..I woudnt want to be responsible for destroying someones health just to save a buck.


Previous Grow op buyers

In regards to remediation, is it possible to get a clean bill of health on a grow op without a "gut to the framework" IE can you inject mold spray behind the drywall or at the end of the day is it just quicker and easier to remove all the drywall in the house and start from scratch? I presume with the stigma that a complete ripout will help on the resale

 

[Anonymous]

QUOTE (Cribs @ Jun 25 2009, 09:08 PM) I have a situation that I would like to get some input on.

I have put an offer on a property which was accepted. After acceptance of the offer I found out that the property was once a grow op and was shut down in Feb/08. Have received a copy of the Capital Health effectively clearing the property as fit for human habitation dated in August 2008. I am have much difficulty in finding a mortgage on this property. Anyone have any suggestions as to who or what company may be approachable?
Thanks in advance for your input.

I`m not sure what province your in but if you are in Ontario, the guy who can help you is Dean Hefford, Mortgage Architects, 905-574-9200 x223. He has been helpful in the past and has lenders that will look at Equity and possible income. Especially helpful is an established port-folio showing history.

Due to the difficulty in getting a mortgage due to the Grow Op, I would use this as leverage to get the price down.

Thanks Carol

 

[dplummer]

It depends on the extent & location of the growing within the home. Have the home tested by an Industrial Hygenist or Consultant that specializes in this field. I can provide you some names if you like. They will provide a scope for remediation. These types of homes can be cleaned with no ill effects down the road. Mould is part of our natural plant life & mould spores will enter/exit our homes every time a door or window is open.

Doug

 

[wealthyboomer]

Insurance could be a problem because of Electrical issues as far as how much of the wiring can still be used because of possible excess loads on the wires.

There is more to a grow-op clean up than just the mold issues.

 

[Dan_Eisenhauer]

The Canadian Real Estate Association produced a pamphlet on Grow Ops several years ago. I have just posted a copy of it our website for anyone who is interested.

CREA Grow Op pamphlet

 

[craigw]

Another thing to be aware of with grow ops is that many of them have never been busted by the police, which means a house could be sold to unsuspecting buyers. I was recently looking at a house that seemed very underpriced. The first thing my realtor checked was if it had been a grow op. Nothing came up on his search so we thought it might be a really great deal. The property had been a rental and was trashed inside. Being a contractor however this didn`t scare me. It wass $100000 cheaper than anything else on the street, and needed $40000 worth of work. While touring the property we started to notice some problems. The floors were very squeeky. This house was only 6 years old. A few squeeks I could understand, but every step. Grow ops have so much moisture that the plywood flooring expands. When the plants are removed and the moisture levels go back to normal the plywood contracts a bit. This creates some movement around the screw and nail heads which causes squeeks. Next we noticed some of the wiring in the basement had been tampered with. Loose wires hanging from the ceiling etc. By this time we knew something was up. We started looking specifically for grow op signs. We found faint circular outlines on the concrete floor. Sure sign that there were pots there. Then the one that really blew us away was when my realtor checked behind the electrical panel and found a hole in the concrete. I was able to put my entire hand through the foundation and grab a handful of dirt. We checked for signs of mould but couldn`t find any. That doesn`t mean it wasn`t there. Another thing I checked was the attic insulation. The house had blow in insulation that will get clumpy if there is alot of moisture present. This was a little bit.
Luckily these are things a good home inspector would have caught. And anyone following the REIN system would never buy a house without an inspection. But if things are this obvious you might save the cost of an inspection. In case you are still wondering, I passed on this to good to be true oppurtunity.


Craig Williams
WrenCorp Developments

 

[DaveRhydderch]

I read this post with some interest. I have a client looking to buy a remediate grow op, but we`re having trouble finding anyone who will finance it. Ignoring the perils of buying a property like this, anyone know of who does finance these properties?

 

[dplummer]

You`ll have to look for private money. My lawyer has been a good source. He only finances for us because he knows we can remediate. He refers us to his clients.You`ll have to convince the money lender your capable & you`ll pay higher interest for sure. Once the property has been cleaned up you can get traditional financing.

Doug

 

[wealthyboomer]

There are so many considerations when buying a former grow-op property as such because of the current, or future mold issues; Wastes from chemical operations that might result in contamination of the property and septic field if it has one;

Electrical issues as far as how much of the wiring can still be used because of possible excess loads on the wires.

and then there is the question of current and future property insurance renewal issues. Who is willing to `insure` the property? Insurance companies are very specific about certification for grow op homes.
The house is always stigmatized after the fact with buyers scared that someone will try a grow rip or drive by shooting unaware that the house has been sold in addition to the health risks.

 

[MKBridge]

I just sold (closed yesterday!) a former grow op house that I renovated with another REIN partner. There were too many headaches than it was worth. We had a great private buyer, but they could not get mortgage insurance. Many people walked away when they found out the history, and they can be hard to finance. Even the people that just bought it found out 2 days before closing that their insurance company wouldn`t insure it - even though they said yes originally.
I am very happy to have sold it, even made a bit of profit and certainly a large amount of learning on this real estate deal.

I won`t be buying anymore former grow ops, that`s one thing I will take away from it.

Kathi