- Hi, I'm Tony Joe and I've been a realtor
in Victoria, British Columbia, for more than 25 years.
I'm joining you today from
British Columbia Real Estate Association's
offices in downtown Vancouver.
BCREA is the voice of BC's realtors
providing advocacy, ongoing education,
economics analysis, and standard legal forms.
Today, we're here, for the first
in a series of conversations on Cannabis,
a three-part web series,
brought to you by BCREA
to help consumers, realtors, and other real estate
professionals get a better understanding
of the risks of growing cannabis at home.
I'm joined today by Dustan Woodhouse,
strategic consultant with Dominion Lending Centres.
Dustan, thanks for coming.
- Thanks for having me.
- Tell us about yourself.
- I can't match 25 years in the business,
but I've been in the business for 11 years
as a mortgage broker,
specifically, so on the finance side,
and I've processed, to date, 1,684 transactions,
so that's probably about a hundred years worth
of mortgage finance experience at this point.
- Great, and you provide training for mortgage
brokers as well too.
- I, yeah, I've been going coast-to-coast,
actually, for the last couple years,
doing a lot of training with,
well, at this point thousands of mortgage brokers
and agents across Canada.
- Great, so this is a really hot topic: cannabis.
So, Dustan, when you learned
about the legislation to legalize cannabis,
what were your first reactions as a mortgage broker?
- Well, I wasn't super excited
because I didn't think that suddenly meant that lenders
were gonna open the floodgates and start lending
to properties that had plants growing in them previously.
- Canada is now the largest marijuana
marketplace in the world.
As growing at home might become more common,
can you explain how insurance
and mortgage professionals are
evaluating properties for risk.
- Well, as they say,
ultimately lenders don't like any kind of risk.
It's always about mitigating risk
and, so, whether it's legal or illegal,
I think we're gonna continue to see
lenders put their own stigma on these properties,
so, either way, it's gonna be an uphill battle
to get financing on a property that is known to have
marijuana plants growing in it.
- Obviously, lending to what is potentially
a past grow op or a future grow op is not
a business case for lenders.
Why would a lender not wanna lend on such a property?
- I think their number one concern is the risk of mold and
in the event that there were some kind of health issue
and in the event that the owners,
of the home, wanted to blame someone,
which, when bad things happen in human beings' lives,
we tend to like to look for
somebody to assign blame to.
My experience, limited, luckily, as it's being in, in
lawsuits, is everybody gets named, everybody,
and who's got the biggest insurance policy
and who's got the deepest pockets?
They're usually the ones that are, are
getting hit the hardest as well,
so, I think lenders just, you know,
that little bit of risk
that something could go wrong,
could cost them a significant amount of money.
And when you really, if you think about the numbers.
I mean, the overall percentage
of properties that we're talking about, right now?
It's likely less than 1%.
For the lenders, they're giving up 1% of the market
and that 1% the risk
could absolutely outsize the damage to them,
so I, I think they just wanna stay away from that.
- I guess it goes without saying that they
would just much rather lend on a traditional home
that doesn't have issues.
- That's right, yeah, keep it simple.
- When a realtor has a seller
who wants to sell their home that was a grow op,
what do they need to have that seller do
relative to mortgaging or financing?
- I'd say whether that grow op
was previously illegal or currently legal.
Either way, the best thing
that a realtor can do
is refer that client to a mortgage broker
to have a conversation about what the financing
is going to look like because potentially
it is going to negatively impact the price
and the realtor may be getting some pushback
on trying to list it at a certain price,
and, so, the mortgage broker,
in that case, can help articulate to the client
here are the reasons why the
property has to be priced a little bit lower.
And, again, if that property
was purchased, 10, 15 years ago,
when there really wasn't that much of a challenge
around the financing, the houses
back then they were still selling a little bit below
average price, but not a lot below.
Whereas, today, it's a much deeper,
and, actually, there's another point worth sharing.
I mean, lenders have access to the notes.
So there's a couple different
things that lenders do.
They have access to the MLS notes,
so they can see previous listings.
They also, actually, Google
property addresses. - Oh, sure.
- And they Google people's names.
- Yeah. - Like I, my clients,
I Google my clients.
Not because I wanna creep their lives; because
I know the lenders are actually going to Google them.
So, KYC, as we say in the business, right, know your client.
- Dustan, can you explain how lenders are adjusting
financing polices to reflect the cannabis legislation?
- Absolutely; they're not.
- Okay; just like that?
- Yeah, I mean, it's not like there's some new
mortgage product opening up for the,
you know, grow at home borrower.
That's, that's not a thing.
- All right.
- I mean, they don't like cannabis
growing on a property, at this point.
They're, they're not open to it.
- Yeah; I can't imagine seeing that change.
- It's highly unlikely.
- Yeah. - The trend that we've seen
for years is more restrictive lending policies,
not less restrictive, so.
- Yes; so for somebody who's
not thinking of buying or selling right now,
just a regular consumer that lives in their home
and maybe wants to grow some cannabis in their home.
From a mortgage broker's standpoint,
what advice would you give them?
- Don't; honestly, you know, if your house
doesn't currently have that stigma,
of having had plants growing in it,
that's a wonderful thing.
And I think right now
it's a little bit too risky, in the lending world, to
start growing plants in your home because
you can take 20%, 30% of the value off your home.
So, really to try and save a few dollars
growing your own at home
those would be. - It makes more sense just to
go and buy it because it's legal now.
- Yeah, I mean, it could be $100,000 dollar
joint that you're smoking, right?
(Tony and Dustan laugh)
- Dustan, how could growing at home
impact a homeowner's chance of
getting a mortgage or remortgaging?
- I would suggest there's a high chance that,
that it will impact their, their odds negatively.
If the home was not previously stigmatized
as a grow up property,
I believe that those clients are
potentially applying a stigma to their own property
by growing marijuana plants in that home.
So, my advice would be don't do it.
- If the government was more clear
or gave more guidelines on this topic here,
do you think lenders will be more comfortable?
- I would suspect not.
We have CHMC, Canada Housing and Mortgage Corporation
that backstops; they basically guarantee
mortgages for the lender.
In other words, they take the risk on,
so, arguably the lender
has no risk in a CHMC-insured mortgage.
Yet CHMC guidelines are generally far more liberal
than what most lenders will apply,
so CHMC may have, say, 20 guidelines
and they say, we will lend to these parameters.
And the lenders say, well, those 20 are fine,
but we're actually only gonna use these 15.
We're actually not going to apply these five.
We're gonna be a little more restrictive,
so you still run into the issue
of even if the government says,
hey, this is okay, we approve of X,
the lenders don't have to approve of it.
They, they can still say, well,
we don't wanna put our money.
- Change the, the goalpost.
- Where can our viewers turn to
for more resources about risks related
to bulk cannabis cultivation and mortgage ability?
- I think, ultimately, it comes down to the act of
realtor and the act of mortgage broker,
who are processing transactions right now.
I mean, that's who they wanna talk to.
Whose signs are popping up in their neighborhood,
who do they know that's in the business,
either on the mortgage side or
the realtor side, that's who they should go to.
- Dustan, if somebody is interested
in buying a house that they know was a grow up
and has been disclosed
as having been a grow up,
the price looks great, what are
the potential future ramifications
that they will be dealing with?
- Well, that great deal they're getting today
is probably gonna have to be a great deal
tomorrow when they go. - To the next person.
- Exactly, like no one, no one truly benefits from this.
They may get more house
for the dollars they have to spend,
but, ultimately, they're going to be giving
that property away at a similar discount or,
as people over the last 10 to 15 years have experienced,
a deeper discount because there have been
far fewer lenders available
over time to lend on these properties.
And, so, the more restrictive
it is to get the money to buy the property,
the fewer the buyers there are.
- Dustan, wrapping up here.
What are the things that
our viewers should be considering,
based on our conversation here?
- I think number one is
do you really wanna have to disclose this?
I think until we have a little bit
clearer understanding of just what
the impacts are going to be,
I wouldn't start planting those seeds
in my basement just yet.
- Dustan, thank you for joining us, today.
- Thanks for having me, Tony, I appreciate it.
- And thank you, the viewer,
for watching this BCREA conversation on cannabis.
Stay tuned for more.