“Rob Stortini line 7, Rob Stortini line 7…”
“Hi I am calling about property ‘454……..’ I need to see it right away.”
“I am sorry there are 17 offers registered already, if you wait a week the property will be available again and I will be more than happy to show it to you.”
“Why would that happen? This is the deal of a lifetime!!”
“Sir this property is a prior grow house with no electricity and in need of remediation. How familiar are you with grow houses?”
There are some situations that people have a hard time understanding. No one seems to understand the two main reasons grow houses are priced so low. The first reason is the amount of money required to make them livable. The second is financing.
There are maybe a handful of lenders in the Toronto area that lend on a drug house and only if it has been remediated. Even if they do lend, there must be at least a 50% down payment. CMHC and Genworth will not insure these mortgages. This significantly reduces the amount of buyers able to purchase.
We always have least 1 grow house for sale in our inventory. A few months back, we had an especially bad property. It was need of remediation, and there was no electricity / hydro meter. This property must have been sold at least a dozen times. Each time the deal would fall apart on financing.
Buying a grow house can be lucrative; however it takes a sophisticated buyer, and it is not for everyone. I was once told, that “there are deals everywhere, its finding the right deal for the right person that matters.” For most people the appeal of grow houses is strictly based on the sale price. This is normally a mistake. Like I said the costs associated with making these properties legally ‘habitable’ can be astronomical.
Some things to expect with grow houses.
- A typical grow house has had the electricity shut off by hydro one.
- Makeshift wiring for lights, ballasts, water pumps etc. is everywhere
- Heavy pesticide use can be hazardous to pets
- Heat and moisture generated from plants causes mold
- Mold can penetrate into the studs of the home and can be hazardous to your health
These are just a few of the problems buyers face with these properties. There are lengthy and costly processes to the remediation of a grow house. These procedures can cost anywhere from $10,000 to over $100,000.00 It depends on how bad the property is.
After all of this work has been done the title and stigma of the tagline “former grow op” will stay on title. This scares many buyers and reduces the price significantly. To complicate matters even more, financial institutions are asking government officials to have grow-ops registered on title to further protect lenders / buyers and sellers.
Here is a recent article in the National Post that fueled this.
Former pot houses growing problem for homeowners
Megan O'Toole January 10, 2011 – 7:14 am
It is a caveat homebuyers in Greater Toronto have become increasingly aware of in recent years. Nestled in among modifiers like “builder’s dream” and “prime location,” a short phrase informs potential buyers that the property used to house a marijuana grow-op.
Legally, real-estate agents must include this information, but as the number of raided grow-ops in the city has climbed, so too has the number of listings with the unfortunate caveat that can dramatically affect the selling price.
“I don’t think anyone in their right mind would pay the same price for a house that had been a grow-up as one that hadn’t been,” noted Tsur Somerville, director of the University of British Columbia’s Centre for Urban Economics and Real Estate.
In fact, the grow-up designation can decrease the selling price of a home by 20% to 25%, noted Cathy Innamorato, a real-estate broker with Remax whose business is focused in the Markham area.
Former grow-ops are increasingly coming onto the market, Ms. Innamorato said, while still more likely “slip through the cracks” — homes that bear clear signs of having housed grow-ops, but that were never raided, and consequently, were not officially designated.
“It’s a huge problem for the buyers and it’s a huge problem for the sellers,” Ms. Innamorato said.
The stigma of a former grow-up tends to outstrip even that of a home where a murder has occurred, experts say, because there are major structural issues to take into account. The high levels of humidity needed can cause mould, while electrical shortcuts used to generate the high levels of power required can make a mess of the home’s wiring. While some sellers attempt to fix these problems, others list the property in “as-is” condition.
“The difference with grow-ops is you actually worry about there being some damage to the house rather than sort of bad energy or bad vibes,” Mr. Somerville said. “There’s actually a risk of actual physical damage that could be costly to repair.”
It can also be difficult to insure a former grow-op. State Farm spokesman John Bordignon says when his firm is presented with an opportunity to insure a former grow-op, a stringent set of tests is required, including a thorough interior and exterior inspection of the home, an electrical safety certification and testing to ensure mould has been remediated.
“We’d require [those] criteria be met prior to considering coverage,” Mr. Bordingnon said.
Constable Tony Vella of the Toronto Police Service notes grow-ups are highly susceptible to fires, which is the main way authorities become aware of their existence. Once that happens, police can seize the property as proceeds of crime.
The number of grow-ups — which can comprise anything from a teenager growing a couple of plants in his bedroom to a full-scale, high-yield operation — was “slightly up” in Toronto last year, Const. Vella said, though he could not immediately provide specific numbers.
Ms. Innamorato said former grow-ops tend to be much harder to sell, typically remaining on the market for longer than an average home. She pointed to one former grow-op on McCowan Road that had been listed since 2008.
“They do stick around for a long time, most of them,” she said.
Potential buyers have also raised concerns about the criminal element involved in grow-ops, Ms. Innamorato said — the fear that owners may come back and try to claim appliances in the home, or that drug dealers may stop by to collect money owed by previous tenants.
“You wouldn’t want to be moving into a house where you’d think somebody’s going to be banging on the door looking for something,” Ms. Innamorato said. “That’s scary, especially if you have a young family.”
Const. Vella urged residents to contact police if they notice any signs of a potential grow-op; for instance, when people are only seen popping by on the odd occasion to move something from the property. In the wintertime, since grow-ops generate a great deal of heat, there is an added indicator, he said: “Everybody’s house has snow on it and this house does not.”
Various institutions are now mandating an “Indemnification Form” to be signed by both realtor and buyer before entering these properties. This form boldly states that if you get sick and die, or something else happens to you while you are in the home they are not liable. Another scare tactic really encourages buyers for these properties...
Like I said grow houses are not for everyone. Low prices typically have costs associated with them…