Recent guidelines for FHA loans will make getting a FHA-backed loan on a meth (methamphetamine) contaminated (or remediated) property virtually impossible.  Since most new loans today for buyers are FHA loans, this will probably severely limit lending on any property that was once a “meth contaminated” property.  The net effect will most likely mean a halt to “buying and rehabbing” meth contaminated properties.

Note that a “meth contaminated property” can be any property where meth was USED or MANUFACTURED!  Yes, meth use may cause your property to be classified as a “meth lab”.  Owners should carefully screen tenants and visit their properties to prevent meth USE (or manufacture) on the premises.  Once a property has been classified as a “meth lab” in Colorado, only a state certified “hygienist” can certify the property is “clean” or remediated…And the cost to remediate is VERY EXPENSIVE and may not be covered by insurance.

Meth contaminated properties are usually encountered when buying REO (real estate owned) or bank owned properties.  Typically, banks don’t provide disclosures or the disclosures are AS-IS, meaning that the bank is either “playing dumb” or disclaiming all knowledge (thus responsibility) for any and all problems or issues.

Even if the property has been remediated to current state standards, FHA loans will be nearly impossible to be used to purchase a current meth property or a previously contaminated meth property.

It seems that the “stigma” of a meth property lasts far after the actual meth problems.  Buyer (and investor) beware!

FHA loan rules are constantly undergoing revision.  In 2012, FHA was not providing financing on “meth” remediated properties.  Buyers would have to use conventional financing (20% down) or non-FHA financing to buy meth-remediated properties.  Check with your loan officer for the latest information regarding FHA loans or call/email us for a list of FHA authorized lenders.

Properties that had FHA, VA or other government backed loans that were then foreclosed are returned to the market through the HUD, VA or FDIC selling process.  These properties are inspected by HUD, VA or the FDIC.  The inspection process will usually reveal if the property was a meth property.  These properties may qualify for special government financing programs, but the number of meth properties found through HUD, VA or FDIC are few and uncommon.

Each state has its own laws how to handle a meth property.  Consult your local Realtor, sheriff or county office for more information.