Your Extra-Moldy Foreclosure Special, Courtesy the Marijuana Industry

The successive waves of foreclosures rippling through the economy are more acute in some markets than others, and some markets have some extra special problems that come along with their foreclosures. Banks are not just taking possession of homes in these regions, they are taking possession of environmental disasters that need to be cleaned up. Buyers purchasing foreclosure homes as-is may be in for some nasty surprises on their home inspections, if they’re lucky. If they’re not, they might not discover the problems until after the situation is a done deal.

Up here, homes used as grow houses are among the ranks of the foreclosures, and you can always identify them, if you know what to look for. The mysterious wiring is a giveaway. No normal home would have that many breakers. Signs of an extensive irrigation system. Evidence of big heaters or fans, especially in a fairly closed or private room. Robust locks on the doors. Sometimes, streaks of mold on the walls, proof that a room was probably kept hot and humid for extended periods of times. Other times, the mold is hidden with scrubbing and painting and you may not find it until it surfaces again, or until you start ripping down sheetrock and wall paneling.

Or until you start wondering why you feel sick in your new house, or why your tenants are getting sick. Exposure to mold can cause respiratory problems at very least, along with a host of other health issues. I’ve walked into a few foreclosures recently where my airways have started closing without any obvious evidence of mold, and before I’ve even seen the physical evidence, I can gasp ‘this was a grow house, wasn’t it?’ For people with asthma and other chronic respiratory conditions, mold can be a killer, and at the very least, it will make you extremely uncomfortable.

Banks are not under any obligation to clean up the properties they sell. There are some legally required disclosures, but banks are not required to, for example, test for mold and provide a report. In fact, banks may go out of their way to not test for things so that they don’t need to disclose them. If a house is toxic because of mold or because of chemicals used inside, in the case of meth houses, it could potentially turn into a massive project for the buyers.

And they might not realise how massive it is unless they are familiar with the issues. One consequence of the flood of foreclosures is that a lot of naive buyers are entering the real estate market. They see good deals on homes and think they may as well take advantage of them. Maybe they thought they would never be able to own homes, and here, suddenly, is a chance. So they look the house over and the realtor says some nice things about it (remember, real estate agents need you to buy property), and then they buy it, and then the problems start to appear, after they have no recourse, and the seller can’t be held liable because it was an as-is contract. If you buy a moldy house, it becomes your problem.

Mold abatement can be extremely expensive. You may have to rip out walls, supporting joists, insulation. You can easily spend tens of thousands of dollars on eradicating the mold and getting the home properly sealed again. And that’s if you have tens of thousands to spend, which you may not. Home insurance won’t help you, and if you tapped yourself out on the down payment, you could be facing an uninhabitable home that you can’t do anything with. You might well find yourself trying in turn to sell it to someone who can deal with the mold, which you now have to disclose because you know about it, and this will drive the price down.

This is a direct consequence of the handling of drug policy in the United States. People would not be buying homes contaminated with mold and harmful chemicals if it weren’t for laws forcing people underground. Aside from the fact that grow houses take usable housing away from people when they are in operation, they can create a nightmare for property owners, whether existing landlords who were unaware of how the property was being used, or new buyers who unwittingly purchase a grow house. Producers of drugs often walk away from home loans, for a variety of reasons, which means that when you have a flooded foreclosure market in an area where drug production is high, you have to anticipate that many of those homes were used for drug production, storage, and sales.

Which means that buyers in those areas need to be careful. They need to learn to recognise the signs of a house used for drug production and they need to understand what they could be getting into with purchases of such homes. They need detailed home inspections to check for specific issues like mold or perilous wiring. And they should get accurate estimates on the costs of repairs; maybe they feel ready to take on the project and they have the capital to do so, but it helps to know what is going to be involved. Those same estimates can also be useful for price negotiations. Banks don’t want to sit on inventory forever and if you’re looking at a foreclosure that is going to need $40,000 worth of work to be habitable, you should say so when you’re bantering back and forth on the price.

A former grow house doesn’t have to be a bad deal. In fact, it can be a very good one, if you know what you’re doing. But, for those who don’t know and are buying unawares, it can turn into a snarled mess that may be far more than they bargained for when they thought they were getting a great deal on a cheap foreclosure to use as a starter home.