Paying cash, then financing

[Joseph J DiFranco]

Hello all.  I'm appraising a three flat in chicago with an illegal garden unit.  Owner says an old water bill/document shows 3 units but city says two units.  Any thoughts as to the likelihood of getting the city to call it a three unit again?  How common is it for investors to purchase property with an illegal unit, but continue renting.  Or do most go for duplexing the unit.  This property is Humboldt Park/West Wicker Park area of Chicago.

Also, just seems goofy, as the buyer is paying cash for the deal, but after closing, will be obtaining financing.  Is this fishy or common practice?  I never see this, so any commentary is appreciated.  Also seems weird, as the property appears to have sold above market value.

Any thoughts greatly appreciated!

[Mike McCarthy]

@Joseph J DiFranco I cant comment much about the 2/3 unit issue. Depends so much on the city and where her it’s just a clerical error.

But on the cash to finance issue, yes, a lot of investors (me included) do that. It makes the purchase process much easier and faster, and makes my offer much more enticing to the seller. Quick close, no worries about a mortgage not being approved, etc.

I usually do some repairs and upgrades to the house, then get financing based on the new appraised value. The mortgage process is still a pain and takes 45-60 days to close, but then I’m in less of a rush, and can often get a higher valuation based on the upgrades and improvements made to the property.