. §1.165-9(b)Property converted from personal use(1) If property purchased or constructed by the taxpayer for use as his personal residence is, prior to its sale, rented or otherwise appropriated to income-producing purposes and is used for such purposes up to the time of its sale, a loss sustained on the sale of the property shall be allowed as a deduction under section 165(a).(2) The loss allowed under this paragraph upon the sale of the property shall be the excess of the adjusted basis prescribed in § 1.1011-1 for determining loss over the amount realized from the sale.

I requested that the counter be put in writing in the same format as mine through an AOE, but my realtor mentioned that is not the standard and this is typically only done when negotiations are complete.

Ask if the standard PSA like realtors use has an addendum for SF.

If you don't file it at closing then you would need to wait 6 months for a standard Fannie/Freddie type of a loan.

Deduct for the potential cost to tear down all of the unpermitted work3.

Use your minimum deal standards (i.e. 25% )?

@Jamie Malsberger you are looking for a standard loan.

To understand the complexities of a househack for tax purpose - You own a personal residence in addition to an investment property.Payments made directly(repairs to unit) to the investment property or indirectly(mortgage interest, real estate taxes, insurance) are deducted against your rental income.

What's your standard of practice?

Double check me on this but the homestead deduction only occurs for owner occupants.