The pot growing behind the tenant’s closed door

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.

pot growing in house - by sacramento appraisal blog

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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A profile of a pot house in Elk Grove

There have been quite a few “pot houses” discovered in the Sacramento area over the past few years, especially in the City of Elk Grove. Most of these residential “farms” have been found in newer subdivision built during the past ten years in houses that are typically 2500-4000 square feet. Let’s take a look at one recent pot house sale from February 2011 to see how the neighborhood market reacted to this sale.

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 News 10 article lists six pot houses that were raided. If these houses have since sold on the open market, they have potential to help us measure the impact that indoor marijuana cultivation might have on local real estate.

Would you buy a former pot house? If you are an agent, have you sold one? How have you seen pot houses impact the ethos of a neighborhood or real estate values? Share your story below.

If you have any questions, or real estate appraisal or property tax appeal needs in the Greater Sacramento Region, contact Lundquist Appraisal by phone 916-595-3735, email, Facebook or subscribe to posts by email.