Marijuana Killing Real Estate Deals
Lost a loan because the borrower had applied for a commercial marijuana grow permit in WA State and his purchase transaction was a residential home on 10 acres. The MI underwriter picked up on the grow permit application and denied MI coverage killing my deal. Fast forward a month and another lender closed their loan, apparently their MI didn’t check…but I don’t know for sure. This occurred about four years ago. My u/w center manager still reminds me this is one of her most memorable loans.
Lending on any property that grows will get declined. Private Money is available though..
As an appraiser we fall under federally regulated guidelines. Even though the state has allowed it, in California throw in city and county statutes. In my county where I appraise, cannabis is allowed to be grown legally in certain zoning and about 99% is not residentially zoned areas. So what are growers doing, yep setting up shop in a residential home or rural residential land, neither of which allow growing cannabis. Yet they continue to violate the law. What the growers have done is gone to rural areas bought up land and set up shop in presidentially zoned property. The issue is they have inflated land prices and created a RE bubble. Now since June 2019, sherriff’s raids have confiscated plants, weapons and arrests of growers. This has now lead to an issue with a softening in land sales volume and eventually prices (my prediction) a softening in pricing. So as an appraiser I am obligated to confirm market influences and what is on the site or in the home. Cannabis has an impact on value and certainly not always good. So if agents keep sticking their heads in the sand, then deals will get declined. What I enjoy is the call from an agent or loan rep telling me I am killing their deal. Hmmmmmm did I kill it or did they, by not doing their due diligence. So even if ever federally approved you still have zoning and land use issues. Which is part of my world that I have to review, analyze, and comment. Thanks, that pesky RE appraiser.
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