Monday, November 17, 2014

Illegal Drug Activity In A Home, Buyer Beware...

What's Lurking Behind Those Walls?  Readers can educate themselves on the signs of drug contamination when looking for a personal home purchase or "flip", (a purchase with intent to resale when rehabilitated).  The later is what scares me most for buyers.

This article was published in the September/October 2014 issue of REALTOR magazine and written by Melissa Dittmann Tracy.

What's Lurking Behind Those Walls?

Illegal drug activity in a home, even from years ago, can come back to taint a real estate transaction.
When sales associate Suzette Bailey of Real Estate Central in Cross Lanes, W. Va., tours a home with buyers, she knows that if it reeks of cat urine and has groupings of everyday household products like stripped-out batteries, lighter fluid, salt, and empty two-liter plastic soda bottles, the home’s problems are likely to stretch well beyond aesthetics. Such signs are potential red flags of a highly toxic substance lingering in the home—methamphetamine.
So-called “meth houses,” homes used in the manufacture of the drug, represent a small percentage of the overall inventory. Still, Bailey recently noticed an uptick, particularly among bank-owned homes, prompting her to contact the local police department to learn the signs so that she could warn buyers. On her website’s home page, she points clients to the state’s registry, which reveals the addresses of nearly 1,000 properties with clandestine-drug pasts.
Warning Signs of Meth Contamination
  • Eyes or throat burning when entering the property
  • Chemical stains on toilets and bathtubs
  • Large number of lithium batteries, particularly ones that have been stripped
  • Propane tanks with fittings that have turned blue
  • Strong smell of urine or unusual chemical smells like ether, ammonia, or acetone
  • Trash filled with a large amount of products like paint thinner, lighter fluid, 
drain cleaners, and cold tablet containers
Source: Meth Lab Cleanup

The Duty to Disclose

Growing media attention over the lingering effects of homes contaminated with clandestine drugs, particularly from meth and marijuana production, has prompted more public attention to the issues surrounding these properties.
Sometimes, drugs can seep into a home’s surfaces, insulation, and even drywall, and cause a host of health problems for unsuspecting home owners, from respiratory illnesses to neurological problems, according to the Drug Enforcement Administration. Homes where marijuana was produced may be more prone to mold, which poses similar health problems to meth. In addition, shoddy electrical rewiring is common in these homes, which can pose a fire danger. To remediate homes can cost $5,000 to $10,000 or more, depending on the level of contamination and size of the home, according to Meth Lab Cleanup LLC, a national company that does clandestine-drug remediation and conducts nationwide training.
Property disclosure laws pertaining to potentially hazardous substances, such as asbestos, radon, and meth, are largely a state matter, though the presence of lead-based paint is one area addressed by federal law. About half of the states—including Illinois, California, and Texas—require home owners and agents to disclose known meth exposure in homes for sale. Among those with no such disclosure requirements are Florida, Tennessee, Michigan, and Georgia. (A complete list of state laws and regulations is available at methlabcleanup.com.)
Learn more about the legal issues surrounding marijuana grow houses and real estate in this video:
Regardless of which state you live in, “real estate agents have a general duty to disclose any material fact they know,” says Lesley Walker, an associate counsel with the National Association of REALTORS®. “If they are aware that a property has been used as a meth lab or that marijuana has been grown in the house, that would be considered a material fact and they would need to disclose.” Even in Colorado and Washington, which recently legalized recreational marijuana, real estate professionals must still disclose if they are aware of the drug being grown on the property. Marijuana is still considered an illegal substance under federal law, Walker says.

A Growing Problem

A home’s past is not always apparent. Standard home inspections often don’t turn up drug contamination, says Joseph Mazzuca, CEO of operations at Meth Lab Cleanup, though meth testing kits are available for about $50. The Drug Enforcement Agency maintains the National Clandestine Laboratory Register, a searchable database of addresses that include properties where meth labs have been identified.
Some counties and states also have databases to track such homes. “But if the property isn’t on there, that doesn’t mean it doesn’t have a problem,” Mazzuca says. “Millions of properties -potentially are contaminated.” The number of meth labs skyrocketed in the mid-2000s and reached more than 15,000 at the end of 2010—more than double the number reported in 2007, according to a 2013 report from the U.S. Government Accountability Office. Reported meth lab incidents dipped to 12,694 in 2012 but remain elevated in some areas, particularly in southern and midwestern states, according to DEA data.
Help Buyers Sniff Out a Home’s Past
  • Check the Drug Enforcement Agency’s National Clandestine Laboratory Register. Some states and counties also maintain their own registries of homes where authorities have discovered illegal drug use.
  • Talk to local police about signs to look for and  information about homes where there may have been previous drug-related arrests.
  • Talk to neighbors. About 70 percent of the cases Meth Lab Cleanup handles come from tip-offs from neighbors about the home’s past.
  • If you have suspicions, get a house tested. Meth testing kits, available for about $50, provide lab-verified results on the presence of meth. If it’s present, a professional should conduct further tests (typical cost: $500 to $700) to determine the level of contamination.
Source: Meth Lab Cleanup
The increase in foreclosures over the past few years has heightened the problem, Mazzuca says. Properties may sit vacant in foreclosure limbo for years, and the home’s tainted history may get lost. “Many homes are falling through the cracks,” Mazzuca says. “They haven’t been decontaminated, and they’re later put on the market [to unsuspecting buyers].” About 75 percent of the roughly 2,000 remediation jobs his company handles nationally are bank-owned homes, with the highest incidences of meth contamination found in Tennessee, West Virginia, Kentucky, Indiana, and Missouri.
The drug-related stigma can linger well past remediation and even hamper property values of neighboring homes. A 2011 study conducted by researcher Joshua Congdon-Hohman, assistant professor of economics at the College of the Holy Cross, found that the stigma caused by a meth lab can affect sales as far as half a mile away, with nearby home prices falling potentially from 10 to 19 percent up to a year after a meth-contaminated home was found in the community.
Bailey says she now enters foreclosures with more suspicion than in the past, since the homes are usually sold as-is and no one may be aware of the home’s past. “It used to be thought that only towns outside the city were the big concern, but huge meth labs and clandestine labs are creeping into other areas nearby. Some are nice homes that you never would have thought,” Bailey says. “It can be a financial disaster for home owners. They could face thousands of dollars to decontaminate the home. It’ll hurt their chances to ever sell the property, even if it’s remediated, and it’ll greatly affect the value of the home. I would never want that to happen to one of my buyers.