We're selling: will buyers be able to get a mortgage with lien?

[Ole Midtbo]

Hi, 

My wife and I are in the process of selling our house in Delray Beach, Florida. We bought it back in 2015 without knowing that there was an un-permitted addition where the carport had been turned into another bedroom/storage room. We didn't have any problems with the title company or the bank getting a mortgage. I guess they did not know or find out that the addition didn't have a permit. 

Fast forward to today and we had the house under contract to sell. All of a sudden the buyer backs out and we get a letter from the city saying that someone reported us for having an un-permitted addition plus some other issues (which the city later dropped). 

Since this has to be disclosed and shows up as a lien on the property, will banks refuse a mortgage for a potential buyer even though we have a permit underway? We are now getting a lot of crazy low offers from cash buyers who see it as a quick flip, but obviously we don't want to sell it at their low price. Would our best option be to do the work and sell it later? 

Other info: we currently live overseas which makes the situation pretty tough to manage. We have had an engineer come out to open up the walls and estimate costs. He said it would be 10-12k to bring everything up to code and overseen by general contractor. We had an offer for 195k, but now we are getting offers of 130k which seems a crazy discrepancy considering we have a legit estimate of what it would cost to fix. The good news is that the City of Delray Beach has been very accommodating and open with what needs to be done. 

Any advice on the situation would be greatly appreciated. 

Cheers, 

Ole Midtbo