Cannabis Employment May Affect Buying a Home
The Taboo Subject
I recently had a client who wanted to move to Las Vegas and also buy a home. How we met is not the traditional way of doing business, but is still a good one.
I was out showing homes to a client and the last home she wanted to view was a major fixer upper. Actually, the home probably should be condemned and rebuilt from the concrete pad up. This home was in true shambles.
My client expressed interest and I informed her that this can only be a cash deal as there were many broken windows and the ceiling and roof had major holes in it.
While I walked her back to her car another gentleman pulled up with two friends.
I met up with them and said since the home was in such disarray that I would escort them through the home. Mainly for safety reasons but also to build rapport with a potential new client.
He said something about also being interested and I told him this can only be a cash-only deal. I talked with the agent and asked her if she had any offers and she responded that she had “Many”.
One Thing Leading to Another
I spoke with him and, since he was from out of state, recommended a few lenders.
When I spoke to the lender he informed me about something I had never heard. The lender said he could not approve him because of the job that he had.
“What?”, I said. The lender went forward and told me that this buyer cannot qualify for a loan because he worked in the marijuana/cannabis industry.
“But, recreational marijuana is legal in the state of Nevada.”, I said.
The lender replied, “This is true, but it is not legal on the federal level.”
Because It Is Legal Doesn’t Mean You Can Do It
I started digging into this whole thing on the industry. I started to joke that my client is being discriminated against. Not because he happens to be black or that he was in his early 30s. It was because of his job.
I started to do research on the subject. How can we get this man qualified to buy a home?
He had to resort to his father and sister qualifying for a loan so that he could live in the home.
Federal guidelines classify both medical and recreational cannabis as a Schedule I drug, much like heroin a Schedule 2 substance like meth or cocaine. It is because of the potential for misuse or abuse of the substance.
The Controlled Substance Act (CSA) does not look at recreational use versus medical use as being different.
The federal laws are quite serious and the fines can be very steep to include jail time.
State Versus Federal Laws
Just because cannabis is approved on a state level does not overwrite the federal laws.
A person holding cannabis can still be arrested with illegal drug charges even if they are in a state where it is legal. This may come as a shock to you. The federal government, if they chose to, could come after you or anyone working at a place that involved the cultivation or distribution of cannabis.
What About Buying a Home?
This is the challenging part for people who work in the cannabis industry. Many banks fearing federal regulations are not wanting to touch people in this industry.
Many banks won’t even allow people employed in this industry to even have a checking or savings account. Thus, many employees are paid in cash and have to hold everything in cash.
Buying a home is even a bigger challenge. More and more banks are becoming more lenient as they test the waters with the Department of Justice. They see this as a potential threat for money laundering and other potentially illegal activities.
When people get a loan to buy a home this involves a wire transfer of funds. If the funds coming into the bank were from an illegal activity then this becomes a matter of wire fraud. This can cause serious issues with the borrower and can also be a problem with the bank and even the banker.
here are Solutions
As a Realtor who just became aware of this problem I also want to say that there are solutions.
Today, I work with a lender who can do loans for W-2 wage-earning employees of the bank. This may not be a solution for the owner but at least it can help out their employees realize the American dream of homeownership.
If you are someone or know someone who is in the business then give us a call and we can see what solutions are there for you.