Grow houses crop up in foreclosures

This post comes from Marilyn Lewis of MSN Money.

Cheap bank-owned homes in once pricey Northern California suburbs are luring low-flying marijuana farmers away from low-income and rural neighborhoods where they used to operate.

Upscale homes that sold for as much as $1 million before the housing bust "have been turned into grow houses, equipped with the high-intensity lights, water and air-filtering systems necessary to produce potent, high-quality marijuana," The New York Times reports.

MSN Real Estate, in another article on the phenomenon, says "the houses are often in places you'd hardly suspect, such as gated Florida communities and upscale Georgia neighborhoods -- even Beverly Hills, Calif."

The indoors farms often go undetected until fire breaks out from unsafe wiring. The Times tells of a Vallejo, Calif., resident who stumbled on a grow operation when he knocked on the door of a neighboring home to let residents know their home was burning. No one was inside. Firefighters found the five-bedroom, 2,251-square-foot home filled with plants and growing equipment:

"They just blended right in," Mr. Snowden said of the residents. "They left early for work and came back late in the afternoon. They mowed their lawn, took out their trash and got groceries. There was never any extra foot traffic."

Problems in Northern California

Growers buy or rent bank-owned properties for a fraction of pre-bust prices. They quietly blend their operations into the surrounding neighborhood. Vietnamese-American crime groups are especially active in the market in Northern California, the Times reports.

In California, the legalization of medical marijuana has fostered a more tolerant climate, and grow operations are not pursued and shut down as vigorously as they once were.

In Pittsburg, Calif., 40 miles northeast of San Francisco, the Times tells how growers took over a five-bedroom home across the street from an elementary school. The home was part of "a sprawling, luxurious community" where properties selling for $1 million in 2007 had fallen into foreclosure. After police busted the grow house in 2010, it became a family home again, selling for $363,000. (Post continues below video.)

Cash-strapped California police departments are struggling to combat the problem. Indoor farms are cropping up in financially troubled towns like Vallejo, which declared bankruptcy in 2008. The Times reports:

"Ten years ago if there was a grow house, we'd seize all their equipment and lamps, and they would be prosecuted," said Sgt. Jeff Bassett, a spokesman for the Vallejo Police Department. "Now the chances of being caught, or of being prosecuted if you are, are substantially less than they were 10 years ago."

Profit motive

Lucrative prices for marijuana make the business super attractive. Marijuana grown indoors fetches up to twice the price of outdoor-grown varieties, the Times says. California has become a magnet for the industry:

California accounted for more than 70% of all marijuana plants confiscated nationwide in 2010, the last year for which statistics are available, according to the Drug Enforcement Administration. The authorities seized 188,297 plants at 791 indoor grow houses, compared with 107,047 plants at 572 locations in 2005.

MSN Real Estate outlines the potential profits:

How can growers afford such high rent? It's easy. With only 50 plants in a house, and at least three growing cycles a year, growers can easily net as much as $300,000 a year from sales to dispensaries and buds sold on the black market, says Ron Brooks, president of the National Narcotics Officers' Associations' Coalition.

"Marijuana is so lucrative as a crop," he says, and it carries less prison-time risk than other drugs.

Florida, too, is seeing a flourishing indoor-growing industry. In 2009, the state had the greatest number of indoor marijuana grow sites seized. It had the second-largest number of plants confiscated, according to U.S. Department of Justice statistics cited in this news release by a "cannabis cultivation defense attorney" in Florida's Palm Bay area. Penalties for growing became tougher after the Florida Legislature passed a "Marijuana Grow House Eradication Act" in 2008, the release says.

Trouble for neighbors, homebuyers

Grow houses make problems for neighborhoods and for subsequent buyers of the properties, even when they operate so quietly that no one knows they're there, MSN Real Estate says.

Besides the risk of fire in the neighborhood from faulty wiring in grow houses, properties often are poorly kept up, diminishing a neighborhood's attractiveness and dragging down the value of surrounding properties. Gang shootings sometimes erupt from drug and money disputes.

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For buyers of former grow homes, mold and mildew may saturate the inside walls long after a high-humidity indoors farm has been dismantled. Sellers and real-estate agents are required to disclose a home's criminal past, but buyers can help themselves by doing some old-fashioned leg work and using common sense, paying special attention in towns where grow houses have been a problem.

To protect themselves, buyers should have a home professionally inspected before making a purchase, MSN Real Estate says. Shoppers can chat with neighbors to learn the history of the house and ask local police departments to search their records for a history of illegal activity at the address.

More from MSN Money:

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