On July 1st, recreational marijuana became legal
in Oregon. Homeowners can now
lawfully have up to four plants in their home, not just for “medicinal uses”. I am not a marijuana user, but this issue has
implications for appraisers who do refinance or other lender type appraisal work
The problem is that although possession of marijuana is
legal here in Oregon, it remains highly illegal in the eyes of federal
government. Since banks are federally
regulated, and most residential loans are federally backed, banks can be
subject to fines related to lending when there are illegal activities. If you grow marijuana in your home, you may
not be able to refinance your home loan.
The following is a quote from an email that A Quality
Appraisal received from one bank regarding Oregon’s marijuana law. (The name of the bank has been removed from
encounter a property with an active marijuana grow operation, please take at
least one descriptive photo, complete your inspection of the property then
cease work on the file and immediately contact your Appraisal Coordinator.
Please do not attempt to quote our lending policy. We will take care of that
and you will, of course, be compensated for the time you’ve already invested in
This bank asks appraisers to record something that many
homeowners may feel is extremely personal.
I think that this could be so personal that some homeowners might become
violent if a photograph is taken and not explained. Just imagine if the homeowner works for a
company that would fire them if they are found growing marijuana. An appraiser taking a photo could be in
particular danger if the appraiser cannot tell the homeowner the truth about
why the photo is being taken.
This leaves appraisers in a very difficult position. Are we being turned into government
watchdogs? Does the right to privacy end
if homeowners are engaged in a (locally) legal marijuana grow in (or on)
private property? Does this policy only
apply to growing marijuana plants? What
about possession of legal amounts of dried buds or commercial products made
from the active ingredient of marijuana, THC?
In pondering all of the above, I have decided that perhaps
the best course for the appraiser (aside from just not accepting work from such
lenders) is to be very up front with homeowners. When scheduling the inspection with a homeowner,
a quick word about the implications of visible grows may just be the stich that
Have you dealt with this in the past? What do you think is the best way to handle
these issues? Did I leave anything out
or do you want to join in the conversation?
Let me know in the comments below.
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real estate appraisal related comments on our blogs and YouTube videos. If you need Portland, Oregon area residential
real estate appraisal services for any reason, please request
appraisal fee quote or book us to speak at
your next event. We
will do everything possible to assist you.
Thanks for reading,
When talking to appraisers and other real estate professionals, I often hear that it is the job of an appraiser to protect the bank. In my judgment, this is not true. An appraiser’s job is to develop and report opinions of value and to protect the public’s trust by complying with the strict Uniform Standards of Professional Appraisal Practice (USPAP).
Bank Underwriters are required on most loans to use an appraiser’s opinion of value as a way to determine if there is sufficient collateral for the loan. An appraisal is only one factor in many that helps a lender determine the overall risk of a loan. Banks themselves (and bank regulators) protect the bank’s and the public’s interest.
This begs the question, “If an appraiser’s job is not to protect the bank, then why do appraisers ask for repairs or inspections when performing an appraisal on a home for the mortgage?” Appraisers “call out” repairs because lenders have internal and regulatory guidelines that require minimum property condition standards prior to funding most loans. When a property has a condition that fails the minimum requirements set out by the guidelines, then the appraiser typically conditions the appraisal report for a repair.
Appraisers can value a property both “subject to” or “as is”. A “subject to” appraisal is based on a hypothetical condition that a repair has been made. Most lenders do not want to loan on a home with defects that may cause harm to the occupants or to the structure if left unattended. This is because a home that needs no repair makes a less risky loan in terms of both liability and repayment. Therefore, with appraisals for loans, the appraiser will typically make note of these issues and make the appraisal report “subject to” repair or further inspection. Typically, the loan cannot fund until the “subject to” repairs are made or when further inspection finds that repairs are not necessary.
Did I leave anything out or do you want to join in the conversation? Let me know in the comments below.
If you find this information interesting or useful, please subscribe to this blog and like A Quality Appraisal, LLC on Facebook. Also, please support us by making Portland real estate appraisal related comments on our blogs and YouTube videos. If you need Portland, Oregon area residential real estate appraisal services for any reason, please request appraisal fee quote or book us to speak at your next event. We will do everything possible to assist you.
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