The perils of selling a house with pot plantsMarch 17, 2017
Although cannabis is legal in some states, it’s still not legal at the federal level. For now, the federal government isn’t pursuing those who grow and possess pot under state guidelines, but the downside may come when you sell a home with marijuana growing inside.
In Colorado, you can legally grow up to 6 plants per adult inside your home for personal use (different rules for medical cannabis). You can’t grow it outside for any reason. But when you decide to sell the house, the wacky tobacky might become a point of pain.
Listings and loans
Marijuana in listing pictures could deter buyers, although there may be a limited number of buyers who see it as a “bonus”. But having these pictures on the MLS, publicly viewable across many syndicated portals such as Zillow, could incur risk from criminals looking to steal plants and equipment. There could also be some risk and liability from buyers viewing the operation at showings; the alternative of locking off an area of the home will arouse all kinds of buyer suspicions.
Scott Hamling, a seasoned Colorado appraiser and VP of Collateral at Cherry Creek Mortgage Company, says homeowners must remove both lights and plants. FHA, VA and even conventional loans answer to federal regulations. One pic by an appraiser of marijuana in the home and a buyer’s loan will be declined.
So if you want to attract more than cash buyers who are comfortable with a growing operation, you will need to take action. Sellers growing cannabis should remove all plants and equipment before listing the house. Since cannabis plants have certain stages in growth when they can’t be moved, sellers will need a plan for the timing of the listing.
“Colorado is a very competitive real estate market,” said MJ McCarthy, General Manager of Redefy Colorado, “If you want top dollar, you should eliminate the potential reasons someone would not want to purchase your home on the front side of the transaction as opposed to dealing with the problem later on. This holds especially true for houses with hobby-esque growing operations.”
Bear in mind that even if you remove the plants and equipment, there may be some disclosure issues. Currently, you’re not required by law to disclose a former grow operation, but the waters are very murky. Many seller’s agents concerned about lawsuits will want to disclose. If undisclosed and a buyer’s agent comes to find out about it, or recognizes the signs (plumbing, etc.), they will likely disclose it to their client. Don’t be surprised if word spreads.
The Colorado Association of REALTORS® says another consideration for evidence of cannabis growing is an inspection red flag on two fronts. First, inspectors may look for unpermitted modifications, from plumbing to high-powered lighting. Second, inspectors may raise concerns of mold and other damage from water-based systems and increased humidity levels.
Rental properties and pot
Landlords concerned about risk management and future legislative changes (e.g. the federal government decides to enforce laws at the state level) should strongly consider prohibiting the use and growth of cannabis by a tenant in the lease. The cost of remediating a grow house can be steep. If the lease states that the tenant agrees to follow all state and federal laws, landlords can evict those who use and grow pot, even MMJ users.
Landlords and homeowners alike should be aware of other possible costly risks for cannabis growing. Insurance companies may not pay out a claim, or deny coverage altogether, based on illegal and potentially hazardous activities taking place on the property. Certain covenants restrict cannabis growing and the property owners could be subject to fines. If discovered, lenders could call in a loan’s note because proceeds cannot be used for illegal activities.
Homeowners currently and considering growing cannabis legally in Colorado need to consider all the ramifications and risks, especially when it comes time to sell the house. Talk to an agent if you have pot plants onsite well before you list your property.
Redefy’s experienced agents know the current issues affecting buyers and sellers. Sellers, flat fee full service means you’ll save money for more important things — like a nice philodendron and a vegetable garden!