Practice English Speaking&Listening with: Resources for REALTORS®: Conversations on Cannabis Episode 1

Difficulty: 0

- 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.

- Exactly.

- 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.

The Description of Resources for REALTORS®: Conversations on Cannabis Episode 1