As we have mentioned in the past, FHA loan requirements have gotten tougher these days. One of the changes is when you are considering buying or selling a home with non-permitted rooms or additions. Our friend Jenna Hirth with PMAC Lending in California has provided us a little insight into the changes that can affect a real estate transaction where un-permitted work was performed.
Good Old Days- Up until a year ago if a property transaction had unpermitted additions or improvements we use to have the appraiser verify that the work was done in a “workmanlike manner” and give it no value on the appraisal report.
Reality with Current Market – Lenders and investors now are much more strict about properties with unpermitted areas. If the unpermitted area has any electrical, plumbing or heating that may pose a potential health and safety issue after the transaction closes, they will want the those items capped or removed. If there is lighting they would need to remove the fixtures and cap the electrical and if there was a sink added they would want removed and plumbing capped off. Once these corrections are made the appraiser would go back and inspect.
Of course when possible they can always try to get the improvement permitted. This is all about health and safety and marketability when the loans are sold and insured. If you come across a property with permit issues like these discussed, it would be a good idea to check with the city to see if and how long it would take to get a permit and if that won’t work contact the potential lender to confirm exactly what will be required for the loan approval.
The Urban Team at Realty Executives
602-234-5777
