FHA Loan for Duplex with illegal unit near Chicago

[Kathrina Briones]

Hey BP! Real estate rookie here posting for the first time! I have 2 questions for you:

1. I'm about to put in my very first offer on my first property! But I'm looking for insight on something that came up. The property is a duplex for $290k and the owner revealed that the rear 1bdrm as an illegal unit, so it's being classified as a 3bd/2bath single family. I don't want to deal with liabilities of an illegal unit so my idea is to just use as an Airbnb or STR. Also it's in an excellent location next to the highway and train line with lots of MFH (Forest Park) so I don't know why it couldn't be zoned multifamily.... Should I just try to appeal to the alderman or something? Should I just leave it as an ADU?

2. I'm using an FHA loan and my realtor said I need to remove the rear unit stove and cap the gas line to pass the inspection. Will this work? Anyone want to share their experiences with illegal units and FHA loans?

Thanks in advance for any insight, BP has been a fantastic resource!

[Kathrina Briones]

@Jonathan Klemm thanks for the input! We're looking to put in an offer of $270k. Comps are all over the place in such a small area with such a mix of fixer uppers and luxury/renovated homes within a few blocks of the property. It's in the southern part of Forest Park, Thomas and Roosevelt. For a 3 bed/2bath SFH that needs some updating do you think I should go lower? She is very motivated to sell, she's had the property for 30 years and is just done with landlording.