Legalization and Lending
What does the legalization of marijuana have to do with your home and your ability to buy a home?
A lot. Prior to marijuana being legalized you were not allowed to grow any marijuana plants in your home. If you did, it would be considered a grow-op (Marijuana Growing Operation).
Banks do not give mortgages on homes that have grow-ops. There are various ways to prove a home may have, at some point, had a grow-op present:
- Through a home inspection
- Through past police reports and records
- Through a PDS (property disclosure statement)
When you are buying a home your realtor as well as your lender will use various tools, including the ones listed above to find out about the history of your home or potential new home to appraise its’ value. You might be wondering why this is an issue, why do lenders care? If you default on your mortgage, the bank takes possession of your home and ultimately has to sell the property to recover the funds they lent you. Lenders/ Banks do not mortgage properties that have a history with grow-ops because they are known to be more difficult to resell. If you’re interested in learning more on this topic, speak to you realtor or check out this article on Financing a Stigmatized Property by Which Mortgage Canada
Now that marijuana is legal in BC, you are technically allowed to grow 4 marijuana plants in your home. Here’s the catch, although this is legal – it’s still a grow-op in the eyes of the bank. They could easily uncover this through a home inspection or through your property disclosure statement. The property disclosure statement has a section which asks the home owner if they are aware of any marijuana grow op’s. If you disclose this information, even though you complied with the rules – you fall into that grow op category.
When financing a property becomes difficult, it affects both your ability to buy and sell:
As a seller – you want your home to be easy to purchase for buyers, most buyers need financing and aren’t paying cash for homes, that means passing a bank appraisal – to which grow-ops are a big no no
As a buyer – you want ensure the homes your looking at don’t have any grow-op history because if you can’t finance it- you likely can’t buy it.
If you would like more information I would be happy to connect you with a mortgage expert, remember to always be open and honest with your realtor so we can guide and protect you through the home buying and selling process.