Breaking Bad, Meth Houses and Real Estate

breaking-bad-logoThe series Breaking Bad just finished up yesterday. Everyone is talking about it, so I wanted to pitch in a few thoughts from a real estate angle.

Buying a Meth House: Would you buy a house that was previously used as a meth lab? Most people probably wouldn’t because of the fear of chemicals and their impact. It is possible to clean up a former lab of course, and you can read a 122-page report from the DEA on how to do that, but still many former labs simply end of being bulldozed so a new home can be built.

Meth labs do sell on MLS, but it’s not always easy to spot the sales. This is thankfully in part to there being few drug labs in Sacramento County, but otherwise since the lab details are often summed up in a matter of words or one sentence, it’s easy to gloss over at first glance. These homes can usually be found though by searching MLS under property description or client confidential remarks for “meth lab”, “drug lab” or something to that effect. Here is a sampling of comments from agents who sold meth labs over the past decade or so in the Sacramento region.

Meth House Comments on MLS:
“Clean report from Dept of Health on file”
“Past use as a meth lab. Has been cleared per sellers”
“Property had a meth lab”
“Per County there was a drug lab”
“Home was used for meth lab. Needing to bulldoze & maybe rebuild”
“Property was an illicit drug lab. It has been decontaminated”

breaking bad meets real estate

DEA National Lab List: If you didn’t know, the Drug Enforcement Agency (DEA) has a database called the National Clandestine Laboratory Register. In the DEA’s own words, “It contains addresses of some locations where law enforcement agencies reported they found chemicals or other items that indicated the presence of either clandestine drug laboratories or dumpsites”. Here are the addresses that came up for Sacramento County (you can search your area here):

DEA list national clandestine lab registry for Sacramento County

Meth and Neighbors’ Property Value: We all know meth houses sell at a severe discount because of the clean-up and stigma  involved. It’s interesting to consider though that meth labs can actually significantly impact value for surrounding homes too. In an extensive study of meth labs, economics professor Joshua Congdon-Hohman found that surrounding properties to meth houses sold anywhere from 4.5%-19% less over a two-year period after the discovery of the lab. Read The Lasting Effects of Crime: The Relationship of Discovered Methamphetamine Laboratories and Home Values (PDF). By the way, I found the link to the study through this blog post last week.

I hope this was interesting. I’d love to hear any comments or further insight below.

Question: Would you buy a meth lab? Is meth a problem in your area?

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Comments

  1. says

    Haven’t watched Breaking Bad myself but your post seems relevant since the stigma attached to drug houses do affect surrounding homes in such a negative way. I’ll have to check out my area for drug house sales. Thanks for sharing Ryan.

  2. says

    Meth house – a problem, BUT, after last Friday’s SAR Industry Update from City code enforcement officials, growing pot in the house for “personal use” which they defined as “about a single car garage sized patch” was not a problem as long as they didn’t make electrical/mechanical/structural modifications in violation of code or without permit…. Do not regard, if they have the card!

    • says

      Thanks Jeff. A single-car garage is usually about 200 sq ft. That’s a pretty big space, which essentially means the personal growth could be about one full bedroom. Hopefully growers will be cautious about moisture. I run into MJ every now and then on inspections. It’s not my place to be a code enforcement officer or PD, but if there is damage associated with any growing, that could be a problem for a loan or property’s value (particularly moisture damage). I would think people would grow in the garage instead of inside, but then again, maybe temperature is easier to control inside.

  3. E Sanchez says

    Ryan, it so happens that 5354 Jade Creek Way on your list was a former rental I owned back in 2005. It was worse that a nightmare when I received a call on a Tuesday from the neighbor stating that I needed to come to my rental as soon as possible. He mentioned that half of the City of Elk Grove PD and HAZMAT where there. I raced form work to get there as soon as possible only to be met my an investigator. I also saw my tenant along with some other men in the back of a Police car. To make a long story short, at the time I had the home on the market and was literally going to close escrow the Friday of that week. As you can imagine, I had to break the news to the buyers that I could not sell them the home due to what had happened. It took me two months and almost $20,000 of work to get a remediation company and the county to give me the clearance to sell it. The positive side to the story is that in those two months, the home appreciated around $30,000 so in the long run I ended up making more on the sale. I was also lucky that the tenant was caught because one of the buyers was an attorney and they had a small child. Imagine what this family would have been exposed to had this not turned out this way. Feel free to ask any questions.

    E. Sanchez

    • says

      E Sanchez, I cannot believe you used to own this house. What a small world indeed and definitely a crazy scenario. I think you’re right that it was ultimately good that it happened this way. You’re extremely fortunate that it happened in a market that was appreciating too. I’m curious if there was any negative reaction in the resale market. Did buyers run or did remediation sooth them and smooth over the negative of being a former lab? By the way you described things, it almost seemed like there was little negative reaction. Also, do you have any photos to share? 🙂

      By the way, for any onlookers, this house is located in a very decent neighborhood in Elk Grove. It is not a ghetto by any remote stretch. This shows that labs can be anywhere.

  4. ricardo says

    Dear Ryan:

    Meth labs can generate large quantities of toxic waste that can both be hazardous and very expensive to clean up, especially if
    toxic chemicals have been dumped into the soil. The same situation applies to properties that formerly had industrial uses — and this can range from dry cleaning to auto salvage. This is why it is important to thoroughly research a property before buying. For example, in Rancho Cordova, there is a wide swath of former Aerojet property and beyond that has an underground plume of toxic waste that was generated from rocket fuel. While the responsible parties are pumping and treating, the fact that there is toxic waste below may bother some people. If I were researching a property I would check with the Cal EPA, Dept. of Toxic Substances Control. They have a duty officer to help the public.

    Ricardo

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