Advice/opinion - bedroom conversion- buying multifamily

[Alicia R.]

Hi all - I'm under agreement for a multifamily in MA. The MLS lists 3beds but the city records list 2 beds...its been converted but there was no permit with the city. my approval is based on rental income for the 3bed not the 2bed. I asked the seller to obtain a permit. Any thoughts/opinions?

[Charlie MacPherson]

Find out why the listing agent states 3 BR.  There may be an error in public records - I've seen it many times.  

I recently sold my pastor's house as he moved back to the midwest.  While standing in his basement, I read public record to him, stating that he has no basement.  It also said he had 2 BR (he had 3) and no garage (there was a 2 car garage).

However, if the 3rd BR was added by the seller without a permit, you might have a problem.

MA is a caveat emptor state.  The seller is under no obligation to disclose unpermitted work unless you ask.

The exception would be if the seller filled out a "Seller's Statement of Property Condition" which is normally attached to the listing, (which specifically asks about unpermitted work) and didn't disclose it, you might have an out.

If the seller goes for a retroactive permit, the town could make the seller demo all of the unpermitted construction and start over.

If you're already under agreement and there's no provision in the offer or P&S to address this, the seller has no motivation to go for the retroactive permit. There's nothing in it for him except headaches.

I think the escape hatch for you would be inability to finance.  If you need the rental incomes to qualify and don't have a legal 3 BR, you can't get as much rent.  That might give you the option of exercising your mortgage contingency.

You DO have a mortgage contingency, right?