Basement not up to code

[Kally Dobak]

My boyfriend and I bought a house through new western acquisitions (wholesaler company) for our first rehab. Bad idea # 1, anyways we got the property in a great area of town and had to close in 3 days, so we were not able to get an inspection. Initially we only got the house because it had a huge basement we were going to turn it into a master, today we learned a surveyor has never came to the property and that it is in a flood plain. So according to code we cannot finish the basement for a master or include it for square footage when we list it. Could we get sub contractors to finish the basement as a master and list it in the square footage anyway ? And In force flood insurance to the buyer.

[Mat Farmer]

Hi @Kally Dobak - I am the General Manager and Principal Broker for New Western Acquisitions here in Nashville, and I wanted to provide some information on this to possibly help you along your way.

I spoke with Anthony, the Sales Agent you and your fiance (Zain) were working with on this transaction, and he informed me that at the time of purchase there was a conversation about the presence of a floodplain on the property, but that local maps showed that it did not actually touch the property dwelling.  Typically in situations such as this, an elevation certificate (or something similar) can be obtained to show that the dwelling itself is not in the flood zone, but that simply a portion of the property is.  An elevation certificate can be obtained from a survey (though there may be other methods locally as well).  I am by no means an expert on this and am simply regurgitating experiences of other investors I have worked with, but in this scenario the dwelling itself would not be treated as having been in the floodplain. 

After reading your post I circled back with the Acquisition Agent who procured this property, and he confirmed that the information provided by the seller was that no flood insurance was required on the property due to the floodplain simply encroaching on the backyard and not the house. I hope this helps. I am unaware of any reasons that the basement would not be allowed to be finished out, unless they are treating the house as being a flood risk. Here is a quick link from the FEMA website that quickly outlines Elevation Certificates and how to obtain them.

https://www.fema.gov/media-library-data/1428941960043-a8f37b7e3af25f47396bbff04e7bf036/FEMA-HFIAA_ECFActSheet_040715.pdf