Since I talked about meth houses last week, I figured it would be fitting to follow up with some thoughts about a much more common scenario. Pot. Don’t worry, this won’t become the Sacramento Appraisal & Drugs Blog. Here is a conversation I had a while back that made me chuckle:
Me: May I see the last room now?
Tenant: Sorry, I don’t have a key to that room.
Me: Oh, too bad. So there is no way to get in?
Tenant: My roommate is traveling and won’t be back for a very long time. He has the key, and he doesn’t want me going in there (keep in mind this is a duplex in a sketchy area).
Me: What a bummer. My client will probably want me to come back when the harvest is ready your roommate gets back into town.
Tenant: That could be a while, but okay.
Me: No problem. I’ll let my client know.
It’s not surprising in situations like this to re-inspect the property a weeks or months later only to find that the “roommate” didn’t have a bed, but only paraphernalia for growing plants indoors.
Does the appraiser have to inspect each room? Ultimately an appraiser is going to need to inspect all rooms in a house if the appraisal is for a loan. In fact, lenders these days want to have a photo of every single room in the appraisal report. This means if you’re growing pot, the appraiser is going to have to take a photo of the room at some point. If the appraisal is for a private reason, the client may give the appraiser permission to not inspect the room and make what is called an extraordinary assumption. This basically gives the appraiser leeway to assume the room is in similar condition with the rest of the house even though the appraiser did not actually see the room.
Here’s my take. As an appraiser I am concerned with the condition of the house. There is obviously a huge difference between a massive grow operation with hundreds or thousands of plants and a home owner with a couple plants (allowable by law). What I’m going to be looking for is anything that might make an impact on value or a health and safety issue – exposed wiring, over loaded plug-ins, poor ventilation, mold, etc…
Question: Would you have a problem buying a house where marijuana was grown? Would the amount grown be a factor for you?
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The sale circled in red on the graph signifies a recent pot house sale in a particular neighborhood in Elk Grove near W Stockton Blvd and Sheldon Road. This house as pictured to the right is just about 2,500 square feet and sold well below the range of other sales, which is obvious when viewing a bracket of properties between 2000-3000 square feet. As you can see, only one other house in this neighborhood sold below $200,000 over the past few years (an aggressively priced short sale in 2009). In this case similar competitive sales around February were selling between $220,000-$230,000 easily. Of course these “comps” did not have major electrical damage, moisture damage, holes in the sheetrock, potential structural issues and all the other factors associated with a “growing facility.”
Tips for Finding Pot House Comps: Usually pot houses can be found in MLS by searching for phrases like “marijuana”, “pot house”, “pot farm”, “agricultural income production” and “growing facility” (kidding on the “income production” – just seeing if you’re really reading). It’s always helpful to ask trusted real estate agents what they know too since sometimes sales are hard to find since listings can say things like “call agent for history of house”. Lastly, search online for terms like “pot houses in Elk Grove” to see what you can find. For example, this