8 Quick Tips for Appraising Marijuana Properties

Marijuana plant

Do you ever face the task of appraising marijuana properties in your market? All of a sudden, land that is ripe for marijuana growing is looking pretty attractive, and buyers all over the U.S. are already scooping up big plots of land—some even making moves before the laws change in a specific area.

We can expect to see:

  • More owners and renters trying to grow their own weed at home
  • New cannabis businesses and farms popping up
  • An increase in rental and industrial properties specifically designed for marijuana growth

Because marijuana is an emerging industry, we don’t yet know what the impact on property value will be. However, as a real estate appraiser, you definitely have to be thinking about it now and in the foreseeable future. As the regulations and laws continue to evolve, it’s important to understand marijuana properties so that you can fairly analyze them.

Here are some quick tips for appraising marijuana properties.

1. Leave the judgment at home

How you feel about marijuana, growers of marijuana, or marijuana laws should have absolutely no bearing on your appraisal. It’s your job to conduct an objective analysis of the condition of the property.

2. Know your client

Lenders vary on whether they will lend on properties that are being used for marijuana growth. It’s usually not an issue, but it can be since marijuana is illegal in the eyes of the federal government. Some lenders will outright refuse to loan money for operations. Others are targeting this specific market and branding themselves as “green property” lenders. Some fall in the middle and simply mandate that plants be removed from the property before the appraisal.

These types of properties often require an all-cash purchaser or an above-average interest rate to be financed, so the pool of buyers can be smaller, and that can often affect value.

3. Stay on top of zoning code

Zoning is a moving target and can change rapidly. For example, counties can ban marijuana facilities in incorporated areas and then quickly change their minds. The market for this property type changes very quickly, more than any other property type. What is legal today may not be legal tomorrow. In general, you should stay on top of the federal and local changes in your market. Additionally, research general legal issues regarding zoning and use for a specific property type.

4. Expect data challenges

Good comparables for marijuana properties aren’t always easy to come by. You typically see few transactions, and when sales do happen, sellers don’t usually advertise all the details of the sale. For example, an MLS may not even mention that the property was a former grow house. You may need to look at multiple properties to make your analysis, for example, finding a sale within the same neighborhood, another in a similar condition, and a third that was also used similarly (e.g., a dispensary or a grow room in a residential property).

5. Conduct some general online searching

Beyond using your MLS or another comparable database to search for comparables, spend some time online searching “your city” + “grow facility for sale,” “grow operation for sale,” or “marijuana property for lease” to turn up more properties than what will show up in your comps database.

6. Protect yourself with disclosures

While it ultimately is up to you what you disclose, we recommend that you share anything that could affect the market value on the property, including health or safety issues and structural changes of a subject property and circumstances where a grow operation is located near a subject property.

Increase your credibility and limit your liability. Enroll in our top-rated CE course: Essential Elements of Disclosures and Disclaimers.

7. Keep a “green” file

Whenever you come across green properties that sold or are on the market, save them. Add a few notes about how those properties compare to other nearby properties you are working on. Additionally, keep any research, news articles, or other information on marijuana and real estate. You’ll build a valuable database you can reference later.

8. Finally, know your role

You are there to determine the market value of the property. You shouldn’t be asked to count plants or verify legality. Nor should you be forced to tell owners what to do with their plants.

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