What You Need to Know Before Considering A Remediated Grow Op
TOPIC
Whenever a past client, or friends, ask me if they should purchase an ex-grow op, because the price is a great deal for the home they are getting, my answer is always: think twice before you purchase! Why? When it comes to financing a grow op, it can be more challenging than expected.
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Where can I get financing?
The majority of the lenders, especially the “A” banks, will not finance a former grow op, even if it’s been remediated for 10+ years. Once there is a stigma of ‘grow op’, it becomes a hard “No.” The few lenders who do, such as a few of our B lenders, credit unions, or private lenders, will consider financing this property, but at a higher interest. It’s true that the purchase price might look like a really good investment opportunity, but with the higher interest rate and potential lender fee, it might end up costing you more.
First Time Home Buyer
Buying Tips
AUTHOR
Jessica Kuan
Yiming Han
What are the underlying costs?
Lenders who are going to finance a remediated grow op may require borrowers to purchase mortgage insurance, or their interest rates are 0.5% or 1% higher than their best rates along with lender fees.
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To ensure the property has been remediated, and no further issues are expected to occur in the future, lenders will require environmental air quality testing. This can cost anywhere between $1,500-$2,000. Air quality testing is to ensure there's no mold, spores, moisture, etc. growing, and ensure the property is livable. Lastly, you may need to pull a re-occupancy permit to ensure that the building complies with all municipality bylaws, and is in livable condition.
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How about the market value?
Since a former grow-op is stigmatized, your pool of potential buyers will be smaller, just as your financing options become more limited.
The concern lenders have with financing remediated grow ops is its re-sale value. If the lender needed to foreclose on the property, how hard would it be for them to sell? Is there moisture in the home that may cause future damages? Until the home is torn down and rebuilt, the stigma of ex-grow op will stay with the home forever.