Pubdate: Thu, 02 Jul 2015
Source: Winnipeg Sun (CN MB)
Copyright: 2015 Canoe Limited Partnership
Contact: http://www.winnipegsun.com/letter-to-editor
Website: http://www.winnipegsun.com/
Details: http://www.mapinc.org/media/503
Author: Alexandra Posadzki
Page: 7

BUYER BEWARE

Tough to Get Mortgage, Insurance for Former Grow Op Homes, Brokers Say

At first glance, the mid-century, three-level Winnipeg home was 
everything Sarah Fehr and her fiancee had been looking for.

It was located in the right neighbourhood, had a double garage and 
the backyard was spacious enough for the couple's two pugs to frolic 
in. Perhaps most importantly, it was reasonably priced.

However, a quick Google search revealed the home's shadowy past: it 
had been busted several years earlier for housing a marijuana grow operation.

While former grow ops may seem like a good deal to some buyers, 
experts caution that banks and insurers are increasingly shying away 
from these properties - even after all of the necessary remediation 
has been done.

Higher rates

"It's always been strict, but it was a lot looser four or five years 
ago," says Jeff Mark, co-founder of broker Spin Mortgage, adding only 
credit unions and subprime lenders are willing to finance these 
homes, often at higher rates than those offered by the banks.

Running a grow-op in a residential home can cause extensive damage 
that may be pricey to remedy. High levels of moisture can cause mould 
to grow in the walls. Pesticides and other chemicals can seep into 
carpets and walls and contaminate the air. Even the home's structural 
integrity and electrical wiring may be compromised.

Before a lender will agree to mortgage a former grow-op, a battery of 
costly tests must be performed to ensure it is inhabitable. 
Fortunately in Fehr's case, the seller had already performed most of 
those tests, and the local credit union was willing to provide a mortgage.

But finding insurance proved to be a headache, says Fehr.

"There were insurers who flat out said, 'No, we will not touch a 
grow-op,'" says Fehr.

Eventually, after jumping through all of the regulatory hoops, the 
couple managed to close the deal and take possession of the home late 
last year. But brokers say the process can be so arduous that many 
buyers throw in the towel, adding that in an increasing number of 
cases, even a single marijuana plant is enough to stigmatize a home.

"The problem is that everything gets painted with the same brush," 
says Scott Dawson, a British Columbia-based mortgage broker with 
Verico Paragon Elite Lending. "Whether there's one plant or a number 
of plants, it's all kind of lumped in together as a grow-op."

Mark of Spin Mortgage recalls one loan application that went up in 
smoke because the disclosure statement said a single marijuana plant 
had been found in the closet. The house had not undergone any grow-op 
related modifications, he says.

"At the end of the day it comes down to the bank's discretion," says 
Mark. "It can be unfair in certain circumstances."

Brokers say the banks are concerned that stigma surrounding the 
home's criminal past will reduce its resale value, making it 
difficult for the bank to recoup its investment if the borrower 
defaults on the loan.

"If it's more difficult for them to liquidate, they just don't want 
that on their books," says Dawson.

Such strict policies can have some inadvertent side effects, says 
Mark. For example, even though most provinces require sellers to 
disclose if a property was formerly a grow-op, some may not disclose 
that, he says.

"I'm sure there are many deals that go undetected because of people 
withholding that information," says Mark. "There are probably people 
out there living in a former grow-op that don't even know it."
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MAP posted-by: Jay Bergstrom