Getty
Amid the coronavirus pandemic, legal weed sales have spiked, with industry leaders pushing for a federal decriminalization as a means to aid the recovery of the currently shackled economy. Even U.S. Senator Elizabeth Warren (D-Mass.) called for the creation of a legal weed market in a tweet today, April 20, the “weed day” holiday for recreational marijuana use.
Aside from economic and criminal implications, the liberalization of marijuana laws across the U.S. is wielding an impact on both commercial and residential real estate. In states such as Colorado and California, dispensaries are often willing to pay top dollar for warehouses to anchor their growing operations. As marijuana cultivation morphs into a regulated, industrial pursuit, former weed growing houses in residential neighborhoods are shedding their once illicit purposes – and some of them are entering the resale market.
According to a February 2020 survey conducted by the National Association of Realtors, a quarter of residential agents in states where recreational weed use has been legal for more than three years had sold a grow house. Of those, one in four “had a hard time” during the transaction.
“The [NAR] members that we asked about that did say that if the house is used to grow marijuana, it can be difficult to get rid of the smell or moisture issues within the home,” says Jessica Lautz, vice president of demographics and behavioral insights at NAR.
Aside from structural problems, which can cost thousands of dollars to fix, houses that once accommodated weed growing activities may carry a stigma (and, sometimes, lower values).
“More times than not, people instantly get turned off,” says Shaunt Zakarian, senior estates director with real estate brokerage Compass, where he has experience with both commercial and residential real estate utilized for growing weed.
Residential weed cultivation grows a slew of structural problems
In 2015, three years after Washington state legalized weed, Sally Herigstad, a personal finance writer and author of “Help! I Can’t Pay My Bills,” purchased a bank-owned fixer-upper for $175,000 near Seattle together with her husband. Holding a real estate license, Herigstad crafted an offer for the property, which her husband had envisioned as an office for his construction business.
“When we purchased it, we were not aware that marijuana had been grown on the property,” says Herigstad, who wrote about the experience for realtor.com. “It was just a very distressed property. There was a lot to look at.”
While several sheds had held the bulk of the grow enterprise, the abode’s electrical box had been tampered with to create an intricate web of wires to supply energy to the structures in the yard.
“That’s a pretty good first clue,” Herigstad said. “Nobody uses that much wiring to grow flowers.”
In grow houses, an unusual, below-code electrical system typically produces an abnormally high power usage to sustain plant cultivation in confined, often darkened spaces that require good artificial lighting.
“It’s probably the big indicator – energy usage,” says Nick Gromicko, founder of the International Association of Certified Home Inspectors. “High water usage is another one. If you can see the water bills and electric bills – that might give you some indication as to whether it has been used for growing.”
If the power wiring could hide in the walls, there are other plain signs that give away former weed growing houses. A lingering putrid smell often haunts the rooms. Some of it may stem from the weed plants that once lived indoors. Some of it might actually emanate from mold that thrives in the high-moisture, high-temperature conditions needed for indoor growing.
Such a setting, “can bring termites, it can bring mold, it can bring dry rot into the wood,” says Zakarian.
“That is why home inspections are so important when you buy a house,” says Herigstad. “It’s one thing to buy a house with a problem that you understand. It’s another thing to buy a house thinking it just needs a coat of paint and carpet and discover [otherwise when it is too late].”
The need for disclosure
According to the NAR survey, only 5% of real estate agents in states where both recreational and medical weed usage have been legal at least since 2016 were aware of special sections on local multiple listing services that direct them to divulge past marijuana growing.
While some states leave it to home shoppers to exercise due diligence in the purchase transaction, others require extensive disclosures from sellers. An example of the latter is California, where residents can now legally grow up to six weed plants (usually in specialized grow boxes that wreak no damage to homes). But if a seller fails to reveal a residential weed growing enterprise, they, along with their real estate agent, could face legal challenges.
While home buyers enjoy the protection of such measures, once they decide to sell, they would encounter the same disclosure standards. “You’re going to have to disclose to future buyers that the house was used for a weed operation or that the house had mold, and that you performed mold remediation,” says Gromicko.
In 2018, having spent three years in renovations that transformed the former weed house into a midcentury-style residence, Herigstad and her husband sold the property.
“We spent about as much fixing up the house as we did buying it,” she says. “It involved a new roof, new drywall, completely new kitchen, new bathrooms. If I were to do it over, I would not buy that house.”