Buying A Former Marijuana Grow-Op As Your Primary Residence

Just the subject line alone will conjure up images in your head; the possibilities are endless.

Maybe you’re picturing yellow police tape surrounding the home, or a biker gang being arrested and led out the front door of the home.

But what if I told you that inside a “former marijuana grow-op” was family who had been living there for 13 years with no issues?

Then would you consider buying a former marijuana grow-op as your primary residence?

epa03462089 (FILE) A file photo dated 31 August 2010 shows a worker tending to cannabis plants at a growing facility for the Tikun Olam company near the northern Israeli town of Safed, Israel. Reports on 07 November 2012 state that Colorado and Washington became the first US states to legalize cannabis for recreational use, while medical marijuana initiatives were on the ballot in Massachusetts, Montana and Arkansas. EPA/ABIR SULTAN ISRAEL OUT *** Local Caption *** 02310452

It’s a tough market out there, folks.

I probably don’t need to say that, again, because it’s getting pretty old at this point.

Most of my recent blogs, and my Pick5 videos, are about how tough the market is.  I think you get it, by now.

And yet despite how tough the market is, every once in a while, I still get a naive, hopeful, albeit clueless buyer out there that says something to the effect of, “We’re not, like, really serious right now, but if an absolutely unbelievable deal comes along, let us know, and we’d be willing to take a look.”

No problem.  You’re the first person I’ll call…

There are no absolutely, unbelievable deals out there.

And even if there were, you’re not going to find them by being passive.

“Deals” in this market are next to impossible to find.

They’re like……well, I guess you could say they’re like teams being down 28-3 in the Superbowl, and coming back to win 34-28 in overtime. 🙂

And when you do find a deal, you have to make absolutely certain that the thing that looks too good to be true, isn’t.

I’ve been working with my oldest friend in the world in the past three months to find him, his wife, and his son, a house.

I’ve known Duncan since he was 3-years-old.  He was actually my brother’s friend growing up, but since I was incapable of making friends of my own, I basically stole all my brothers’ when we were in our early 20’s.

Duncan and his wife Amanda live in a semi-detached bungalow in Mississauga, and have one child, but there’s one more on the way!

Their house was originally a 3-bedroom, but as is the case with those silly condo townhouses on the south side of Sudbury Street in King West, the three bedrooms are like closets, and many people open up the wall between the two 8×8 jail cells to create a functional “master bedroom.”

So with a second child on the way, Duncan and Amanda began the search for something larger last fall.

Their house is worth about $650,000, but their budget to find something larger is only $800,000.  That’s not a lateral move, but it’s not a massive move up either.  We had a tall order right from the get-go.

For those of you that know Mississauga, you know that the housing stock is very different from that in Toronto.

There are a ton of backsplit and sidesplit houses, which are all unique in their own way.  Some work, some don’t.  Some have great layouts, and some are just confusing as hell.

Have you ever been in a backsplit that just keeps going, and going, and going?

You go down to the basement, and find another level below it, and you’re shocked.  But then you find another level below that one!

These backsplits and sidesplits come in both detached and semi-detached form, and of course, the price is higher for the former.

I told Duncan and Amanda right from the start that my goal was to find them a detached bungalow on huge lot – a 50-footer!  They would gain the extra bedroom and the space they needed today, while having an unbelievable opportunity to build a mansion, or sell to a developer, in 15 years when these 50-foot lots are getting their due.

We cast the net wide.  Really wide!

From Dixie Road to Winston Churchill, and from the 403 right down to the water.

Looking in Mississauaga always seems to end up that way, and it’s so different from Toronto.

In Toronto, I find most people have a small geographic area in which they want to search.  They might go outside that area, but barely.

Few people say to me, “I’ll live in Bloor West Village, but also in The Beaches, and basically anywhere in between.”

But when it comes to Mississauga, I find my buyers will live just about anywhere.

We started to look in early November last year, with the knowledge that we probably wouldn’t find something in 2016, since the market was drawing to a close rather quickly.

Amanda was on fire with the new listings, emailing me 4-5 per day, and keeping on top of what was selling.

There was that one house that sold in the fall, that we looked back on in the spring, and said, “Oh that would have been perfect.”  A lot of buyers feel that way after they get discouraged in a market, and look back to when they started.  There’s always that one house that they “would have, could have, should have” bought, but they weren’t ready.

As a lot of buyers out there are finding so far in 2017, it seems as though the market went up 5% as soon as the calendar turned from December to January.

Duncan and Amanda felt this right away, and as the 2017 market wore on, it got worse.

We spun our wheels with a lot of semi-detached backsplits, and although I kept trying to convince them that the space – and all those levels, were great value, we never found one with the right “flow.”

We watched as houses we didn’t like at all routinely sold for $780,000, $790,000, or some of them even over $800,000, which was our max.  It was really tough to see houses that we wanted to pass on sell for more than we could afford.  At times, it felt like the search was pointless.

We ventured west of Winston Churchill a couple of times, and found ourselves in Oakville.

“Wanna live in Oakville, Duncan?” I asked as we stood outside this one house – a “link,” where the house looks detached, but actually shares a foundation with the houses on both sides.  The house checked all the boxes from the outside, but once we were inside, it actually felt like a downgrade from their semi-detached bungalow!

Duncan and Amanda have a massive finished basement, with a guest bedroom, and a family or rec-room that’s perfect for watching epic 25-point comebacks in Superbowls…

And yet every time we saw a basement in a sought-after “detached” on a 25-foot lot, the basements were tiny, often less than half the size of what Duncan and Amanda already had.

We bid on a few houses, never really getting close.

We got absolutely blown out on one – losing by over $100,000.  That’s never fun.

I looked back to my original idea of a detached bungalow on a 50-foot lot, and felt irresponsible for even suggesting it.

These were going well past $850,000 now, and into the $900’s.

The ugly backsplits that we didn’t like were pushing past $800,000 as well.

Through the whole month of January, we only found one house we liked, and that was the one we bid on, and lost by $100,000.

Then last week, I was looking on MLS and saw a house in our price range – $800,000 even.  A very odd price, since most people price at $799,900.

This house had been on the market for 14 days, though, which I thought was odd.  Why didn’t I see it?

Then I saw the “PC” and realized this had a price change.  But when, why, how?

This looked like a $950,000 house!

A 2-storey, detached, on a 50 x 120 foot lot, with a goddam pool in the backyard!

It didn’t make sense.

I figured maybe they were out at $979,900 or something, and the “PC” was them dropping the price to $800,000, to try to set an offer night and solicit multiple bids.  I hate when agents do that, as though the market was asleep, and/or born yesterday, and were unable to do a history on the listing.

But as it turned out, this wasn’t the case.

The property was actually reduced in price from $850,000.

And the listing even said, “Offers any time.”

I couldn’t figure it out.

$800,000?  For this house?

What was I missing?

Well, folks, at the risk of milking this too long, and since you already read the subject line for today’s blog, I’ll tell you the obvious: this was a former marijuana grow-op.

There was a small note in the broker’s remarks that said, As Per 2003 Listing “Former Grow House.”

Well, then!

That explained a lot.

In fact, that explained just about everything!

No buyer out there looking for a place to raise their family is going to purchase a former grow-op.

And even if they wanted to, not a single lender in the province would advance a dollar.

But I was intrigued by this, and even though I don’t make it a habit of chasing unicorns, I decided to spin my wheels a bit.

I asked our in-house legal council at Bosley, one of our managers, and my mortgage broker, and their responses ranged from, “You’re wasting your time,” to “You already know the answer to this,” to “Have you ever successfully got your hands on a unicorn?”

I probably should have quit there.

But I ran the history of the property, and this house sold in June of 2002, closed in August of 2002, and was then sold again under power of sale by a bank in October of 2003, having been listed in September.

There were only thirteen months in between the closing of the house by the alleged grower, and the listing by the bank.

And you can assume that it took a few months for the bank to foreclose, and this would be after an investigation.

So perhaps the “growing” stopped in, maybe, May or June of 2003?

And how long did it take for the growers to set up?  A few months?

Maybe they didn’t start growing until, say, November of 2002?

So all told, we have maybe 4-6 months of growing here, absolute, max.

That was hardly a full-scale “grow op.”

I noticed in both the 2002 and the 2003 listings that the basement was unfinished, and yet in the 2017 listing, the basement was fully finished, and the notes said, “Home Fully Renovated By Current Owners.”

The grow-op could have taken place anywhere in the house, but it was more than likely the unfinished basement.

And if the basement was now finished, it meant the current owners did a lot of remedial work back in 2003.

In the photos of the property, you could clearly see children’s bedrooms.

Now call me naive, but what kind of parent would raise two children, for 13 years, in a house that was infested with mold from a marijuana grow-op?

At the risk of chasing a unicorn, I started to think that perhaps this house was stigmatized, but in practice, there as nothing wrong with it.

I told Duncan and Amanda about it, and after a handful of jokes directed at themselves, me, and the house, we decided to go take a look.

The listing came out at $800,000 mid-day, and by 6pm, Duncan and I were in the house for a look.

It was perfect.

Beyond perfect – it was way out of our league.

A 50 x 120 foot lot.  A detached house.  A 2-storey, 3-bed, 3-bath.

It blew away everything else we’d seen to this point.

Duncan and I called Amanda from the car, and said, “This house is perfect, we want to make an offer.”

She more or less said, “So you two geniuses went to see a former marijuana grow-op, and you want to make an offer, without me even having seen the house?”

We looked at each other and started to nod in agreement.  “Yeah, yeah that’s fairly accurate,” we said.

There was dead silence on the phone, and then finally Amanda said, “Alright what the hell,” to our surprise.  “Let’s make an offer.”

“Well, if we don’t get the house,” I told Duncan, “I’ll buy you a pound of weed,” I said as we both laughed hysterically.

(TO BE CONTINUED)

17 Comments

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  1. jeff316 says:

    I’d buy a house used as a grow op, but only if I could be in charge of the renovation to ensure it gets done to my standards.

    I don’t think I would buy one that has been renovated by someone else.

  2. Condodweller says:

    David, I can’t believe you as a recent father yourself would put a friend with soon to be three kids into a former grow-op house. However, I’m looking forward to the rest of the story….. hopefully this blog post is a weather balloon and your friend comes to his senses. I mean let’s say his kids develop severe respiratory issues by the time they turn 10. Do you really want to have that conversation with them in 10 years?

    1. Ralph Cramdown says:

      You can test for mold and chemical residue. Plenty of places that have never been grow-ops have far bigger issues in this respect than a remediated grow-op.

      Here’s more things to worry about: Radon, sewer gas from dry traps or cracked pipes, lead in the soil in places close to highways, diesel particulates close to arterial roads, flooding and dampness in places built over former creeks and streams, and the general poor standard of building, maintenance and renovation (see Mike Holmes, The Condo Game, etc.). If you want your kids to be safe, move to the country, but watch out for arsenic in the well water, cross-contamination from your septic field, and be careful driving.

      As to “20% off in 50 years is $10 million,” if your annual growth rate (%) is the same as a non stigmatized house, who cares? And do you really think people will care that a place was a grow-op 50 years ago?

      1. Condodweller says:

        I know you can test for them, my point is I would not trust the test the seller provides because they will miss-represent everything to show the house in the best light.

        Absolutely there are many factors to consider many of which can be mitigated but that’s not to say any one of them can be ignored. BTW this is the reason I’d rather take my chances in a condo than a house.

        It always surprises me what people are willing to give up for a bit of savings.

  3. crazyegg says:

    Hi All,

    If I were the listing agent, I would use the “see no evil, hear no evil rule”, as long as long as there are no overt signs that the property was used for this illegal purpose, I would be mum…

    Even if it were reported in the news, how many listing agents scrub their listings against this? But then again, if someone were to bring this to my attention and demonstrate proof, I would have to reconsider.

    On a similar note, I know of one client who apparently has “asbestos” in his attic according to his “inspector” friend. I told my client not to tell me anymore.

    Would I volunteer this information to a potential buyer? No
    Is the “inspector” friend a qualified asbestos expert? No
    Is there actual asbestos in the attic? Maybe. Maybe not. (And, I could say that about almost any older house in Toronto).

    Regards,
    ed…

    1. downtown says:

      On the issue of asbestos in the attic, I’m more comfortable buying a place that has a known source of asbestos, than one that doesn’t. With the former, you can either cover it (so there’s none floating in the air), or get it removed safely with a contractor certified in asbestos abatement. (I’ve had this done, and the cost was not onerous). But when you buy an old house that has been fully renovated and no asbestos is visible, you take the risk that they removed it without taking proper precautions and asbestos dust is floating around.

  4. Kyle says:

    I suspect getting insurance could be a hassle. Question for the Agents out there, is there a statute of limitations on how long a house that was used as a grow op needs to be disclosed for? What if it was 10, 20 , or 30 years ago, what if it has changed owners 4 or 5 times? What if it has been torn down and rebuilt?

    Anyhow, in fifteen years, every house will have marijuana growing in it, like basil on a window sill, at which points there will no longer be any profits to grow operators, and any stigma will largely disappear.

    1. Sarah says:

      Hey Kyle,
      I believe that as long as the agent is aware of the history of the house – this information needs to be disclosed. Same goes for if there was a tragic death in the house (i.e. murder, suicide). Given that this information is readily available on MLS listings from the past years (2003), any agent listing that house needs to disclose, as long as the original house is standing.

      As for your second comment, granted ‘in 15 years every house would be a grow-op’, however not every house will be condemned or repossessed as a grow-op. Which would be the only criteria for an agent to have to disclose those details.

      My mom, who flips & sells houses, was mid-flip on an old bungalow with a detached garage when she found out, via an off-the-cuff conversation with a neighbor, that there was a suicide 20+ years ago in the garage…. It was then her responsibility as the listing agent to verify this information – and disclose it to potential buyers. Unfortunately – this REALLY hurt the resale value of the home. Lesson learnt – Don’t discuss those details with a realtor- what they don’t know, won’t hurt them!! (LOL)

      1. Kyle says:

        LOL, today everyone markets what they’ve done to their house, “Fully renovated with permits, new kitchens, baths and electrical!”, will there be a day when people market what they haven’t done, “No murders, suicides, marijuana growing or hauntings!”?

      2. Ralph Cramdown says:

        I wouldn’t have disclosed that unless a buyer asked. It isn’t a latent defect. RECO appears to put the obligation on the buyer/buyer’s agent to ask, if they care:
        http://www.reco.on.ca/registrars-bulletin/stigmatizing-issues/

        1. Sarah says:

          Raalph Cramdown, Really interesting, Thank you for sharing. I was under the impression sellers HAD to disclose. The more you know 😉

      3. David (Not the David who runs this website) says:

        I understand that if there was a suicide or death in the house, it has to be disclosed but how many years have to pass before this can be forgotten? Would it still have to be disclosed 50 year after it happened?

        1. Sarah says:

          Apparently not thought (According to Ralph Cramdown’s link he shared). If the house is ‘stigmatized’ it is the responsibility of the buyer to inquire – at which point the listing agent must disclose. – But if the buyer doesn’t ask, there is no reason the LA has to disclose that info.

          1. Sarah says:

            Though*

    1. Condodweller says:

      I remember reading this article when it came out. I do remember that it was not only the mold that’s an issue but other chemicals used during the grow are as well. I am sorry but my health and the health of my children is not something I am willing to gamble with. Where do people draw the line and say I can’t afford that house and I’m going to stay put or move to where I can?

      If I had a say in public policy I would have all grow-op houses torn down to ensure that not a single unsuspecting family with their vulnerable children moves into one of these places. I think it is incredibly irresponsible for any parent to even consider moving into an ex-grow-op. You just can’t trust anyone when it comes to money and the length they are willing to go to cover up things. Just look at the comments on this blog. People will cover up as much as they can get away with.

      If I were to consider one of these I would determine how much it would cost to do a down to the studs remediation and subtract it from the offer price, along with a healthy discount for future losses on the sale. If my offer was accepted, I would have proper testing done by removing drywall in many locations and if there was any sign of contamination I would strip it down to have it cleaned and rebuild from there. But even then, I wouldn’t know what my loss would be when I resell down the road. That 20% discount today of let’s say $200,000 will be $2,000,000 in 50 years when the house price is going to be $10,000,000. In any other market than what we have today where desperate people will buy just about anything, a former grow-op house will never sell so why take the chance?

  5. Ralph Cramdown says:

    A meticulous seller would have meticulously documented the remediation, with copious before, during, and after photos, and some reports from mold-testers-r-us. It might’ve helped a bit with the price.

    Also, it’d be interesting to know how much lower, percentage-wise, this place went below unstigmatized comps, last time and again this time.

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