Challenges of Buying a Former Grow-Op

Financing a Former Grow-Op

That a home had been a former grow-op is a stigma that will stay with the property forever. Most buyers won’t consider buying one. As well, many lenders just won’t take the risk of mortgaging a former grow-op, despite CMHC’s willingness to insure the mortgage for the lender once the property has been fully remediated.

For Canada Mortgage and Housing to insure a mortgage on a former Grow-Op, and based on our experience, they require the following:

  • A copy of an extensive environmental audit and report performed on the property,
  • Proof that the entire remedial process has been complied with and completed by a qualified contractor,
  • Certification that the property is habitable.
  • A minimum down payment of 20%, and
  • A default insurance premium of 1% of the amount of the mortgage, which can be added to the mortgage amount.

What if there is a City Work Order?

In addition, in the event that the property has a municipal work order attached to it, CMHC would also require that all deficiencies noted in the work order have been corrected and an occupancy permit has been granted by the city.

Insuring a Former Grow-Op

If you can find a mortgage company that will finance the property, an equally big challenge is finding a property insurance company that will cover the home.

Before providing coverage, an insurance company typically requires a full inspection of the home, plus a rigorous set of tests similar to those demanded by CMHC. As well, the cost of coverage can be expensive.

According to Don Takach, sales representative for Century 21 Today Realty, and Gidia Molinaro, mortgage agent for Centum Omni Mortgage Corp, a buyer would be wise to seek out a lender and insurer willing to participate before attempting to buy a former grow-op.

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