Trying to buy home with unpermitted construction

[newbie7]

Yeesh, a $3k bonus for buyer's agent? I don't understand why they would be so desperate. The comps (sans illegal construction) are around $350k at least, and I would think less than $50k would rehab to legal. The land alone was appraised at the asking price. So why has no one snatched it up? Why is the bank so desperate to dump it?

You say "very problematic situation concerning health and safety". What do you mean? There are not actually 2 new bedrooms. One portion of the addition is an extension to a bed room, and the other part is sort of a nook/pantry off the kitchen. The plumbing and electricity could be disabled without much hassle, if needed. So is it really more problematic than simply "nonconforming"?

CJHNV... was that sarcasm? Are you saying that I can't get title insurance with non-permitted stuff? Please explain.

Thanks.

:new_newbie:

 

[redfish]

neighbors usually turn violations in to city officals. Imagine a converted garage rented out to college students. Neighbor finds no record of permit, reports the violation, and gets rid of the weed smoking, beer drinking, loud at all hours of the night tennants. Be nice to your neighbors and the city won't come knocking.

oh yeah, wasn't college fun?

 

[Randolph Kinney]

Yeesh, a $3k bonus for buyer's agent? I don't understand why they would be so desperate. The comps (sans illegal construction) are around $350k at least, and I would think less than $50k would rehab to legal. The land alone was appraised at the asking price. So why has no one snatched it up? Why is the bank so desperate to dump it?

You say "very problematic situation concerning health and safety". What do you mean? There are not actually 2 new bedrooms. One portion of the addition is an extension to a bed room, and the other part is sort of a nook/pantry off the kitchen. The plumbing and electricity could be disabled without much hassle, if needed. So is it really more problematic than simply "nonconforming"?

CJHNV... was that sarcasm? Are you saying that I can't get title insurance with non-permitted stuff? Please explain.

Thanks.

:new_newbie:

We talked to a neighbor. She said there was a lot of police activity as the house was used for a lot of illegal activities in last two years.

Question is, generally speaking, how dangerous is it to buy a house with so many violations?

newbie7,

I posted a photo from the MLS of the side of the house showing the power meter and junction box with what appeared to be exposed wiring (no conduit). What is connected to those wires on the other end inside the house? Are these wires properly connected to a breaker inside the junction box? Is there any over load potential (more amps being used than the breaker is rated)? Is the wire diameter (guage) appropriate for the current draw? Is the wiring copper? Are the electrical outlets inside the home properly grounded and wired correctly?

My guess is that the wiring alone presents a potential of a fire hazard or electrical shock hazard. You may discover after the fact that you will not have a valid claim on any insurance if the structure burns to the ground or if someone is electrocuted.

The additional bathroom that was added could have significant problems behind the walls or under the floor if there are leaks in the plumbing or if the drain is not proper. Where does the toilet actually flush / drain to? Is it properly connected to the sewer line?

What exactly was the illegal activity? Was it a drug lab? Are there any environmental hazards?

If you are a contractor, it sounds like this home is for you. You can spend all the time and money fixing all the things necessary to bring the entire property to code and apply for permits. Once you do that, you can sell the property for what you think it should bring in the market, $350,000 did you say? You can buy it for $209,000.

So why are the buyers not lined up to purchase?

 

[wyecoyote]

I would suggest going to the building department and seeing about getting an as built. They may make you tear down or do repairs to the addition. Is it getting to the point of land value? If so why not tear down and build new?

 

[newbie7]

I spoke to the broker. He claimed there have been many offers on the house, but all fell through. Apparently banks (including the one that owns the property) will not finance it. That pretty much settles the question for us--no can do.

Just one remaining question... How did this house appraise and sell at $390k just two years ago!? Very little has changed since then--it already had the blatant building code violations, and comps are only slightly lower. The illegality of the long-extant construction--especially the housing add-on and the garage conversion--is obvious even to this layman. If it's so untouchable today, how did this thing get appraised clean and financed just two years ago??

What changed to make this go from on-par with comps two years ago, to being of roughly HALF the value of current comps? Is there a lot of corruption among appraisers?

:new_newbie:

 

[hastalavista]

What changed to make this go from on-par with comps two years ago, to being of roughly HALF the value of current comps? Is there a lot of corruption among appraisers?

:new_newbie:

Oh, we're not immune to our fair share of bad actors.

 

[Randolph Kinney]

I spoke to the broker. He claimed there have been many offers on the house, but all fell through. Apparently banks (including the one that owns the property) will not finance it. That pretty much settles the question for us--no can do.

Just one remaining question... How did this house appraise and sell at $390k just two years ago!? Very little has changed since then--it already had the blatant building code violations, and comps are only slightly lower. The illegality of the long-extant construction--especially the housing add-on and the garage conversion--is obvious even to this layman. If it's so untouchable today, how did this thing get appraised clean and financed just two years ago??

What changed to make this go from on-par with comps two years ago, to being of roughly HALF the value of current comps? Is there a lot of corruption among appraisers?

:new_newbie:

I believe it is called greed. The seller wants to sell, the buyer wants to buy. The Realtors want to make the deal go through. Mortgage brokers want the deal to go through. Who hires the appraiser? Who hires the home inspector?

The people with a money interest in a deal going through control the people in the chain of services like steering the buyer to a mortgage broker and suggesting a home inspector or not. The mortgage broker hires the appraiser. The appraiser could be the most favorite appraiser because he always makes the contract value and turns a blind eye to problems with the property. The home inspector may also overlook items because he gets a lot of business from this Realtor. Someone along the chain most likely misrepresented the characteristics of the property. Other players went along with the misrepresentation. In th end, the deal went through and the funding lender did not "see" anything wrong with the property or value. The funding lender sold off the loan to an investor so their interest in due diligence stopped at that point.

Think of it as a game of liar's poker; as long as you get the next guy to take the property, you win! Now it is up to the next guy to convince someone of the value of the home. Wait a minute! Someone defaulted and did not pay the mortgage. The lender (loan servicing agent) foreclosed and got the property back. Now the truth comes out. What does the lender do? The lender does not fix up the place or take care of the problems. They find a broker to sell the property "as-is". Buyer be ware. This is where you come in; some one who is naive and does not know how the game works. Wow! What great deal! Or so you were lead to believe.

There are probably many more problems with the property than what is being disclosed.

 

[Mike Kennedy]

Just one remaining question... How did this house appraise and sell at $390k just two years ago!? Very little has changed since then--it already had the blatant building code violations, and comps are only slightly lower. The illegality of the long-extant construction--especially the housing add-on and the garage conversion--is obvious even to this layman. If it's so untouchable today, how did this thing get appraised clean and financed just two years ago??

Odds are either an AVM or a BPO by Non-Appraisers......or a Desktop Appraisal or a Drive-by Appraisal.


What changed to make this go from on-par with comps two years ago, to being of roughly HALF the value of current comps? Is there a lot of corruption among appraisers?

Or....... a trainee appraiser from 2-3 hours away did an appraisal which was signed by a "remote" Supervisory Appraiser who didn't supervise.

Someone told 'em..........."GIMME THE NUMBER" ......and got what they paid for.


re: this property .......trust the lil hairs on the back of your neck and your wife's "feminine intuition" .......both are NEVER wrong.

Find another property.

 

[hal380]

I would make an offer to buy, "subject to" your ability to obtain permits for the work already done. I would offer less than the asking price. Now you control the transaction for the term of the "subject to" clause. At that point you can either get the permits or decide that you will risk it. In the meantime, no one can come along and buy it out from under you.

Hope this helps

Hal

 

[newbie7]

Thanks Hal, but I don't think there's any point to that. It's clear that 5 construction violations are not possible to permit, and the bank knows that too. Besides, reportedly getting financing will be impossible or nearly so.

At this point, I guess we're hoping the bubble will collapse. Any opinions on that?