Unpermitted Work Completed

[Justin S.]

There is an REO I have under contract and still within my inspection period. I went down to city hall and discovered the additions on the home are unpermitted and violate setback rules. I cannot obtain variances since the issues were self imposed by the previous owners.

If I demo the additions, it would bring the home back to a 2/1 which is highly undesirable in this neighborhood.

If I leave the additions, how does the buyers bank (when I sell), view the unpermitted additions? Will they typically not fund it?

[Chris Martin]

Sounds like this "adverse site condition" would show up on a standard appraisal and from what I can tell, this may impact underwriting. FreddieMac Appraisal Review Reminders says "If there are adverse conditions, the appraiser must provide comparable sales with same adverse conditions to determine amount of adjustments and demonstrate marketability. If there are land-use restrictions, the loan file must indicate that the subject property can be rebuilt if severely damaged or destroyed."

Sounds kind of risky since you may be at the mercy of the lender's underwriter.