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Grow ops may cause reseller problems
Jul 06, 2015
While former grow ops may seem like a good deal to some buyers, many banks and insurers are increasingly shying away from these properties - even after remediation.
Jeff Mark, co-founder of broker Spin Mortgage said that it has always been strict but only credit unions and subprime lenders are willing to finance, often with higher rates than the banks offer. He also says that at the end of the day it comes down to the bank's discretion which can be unfair in certain circumstances.
Before a lender will agree to mortgage a former grow-op, extensive, costly tests have to be made because running a grow op can create a barrage of problems including possible mould and contamination.
Brokers say the banks are concerned the stigma of the home's criminal past will reduce its resale value making it difficult if the borrower defaults.
Jeff Mark also says that strict policies can have some inadvertent side effects. Even though most provinces require sellers to disclose if a property was formerly a grow op some may not disclose that. He is sure that many deals go undetetected due to people withholding that information.
Adapted by The Financial Post:http://business.financialpost.com/personal-finance/mortgages-real-estate/banks-and-insurers-are-increasingly-shying-away-from-former-grow-ops-brokers-say