Illegal additions - VA/FHA loan question

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CM_Dude_IHB

CM_Dude_IHB

New member
I've been away a long while - but am back and in escrow, and need a little advice from the IHB knowledge base. We discovered that everything done to the property is illegal - full remodel, roof, etc. and there are structrual implications. It is so extensive that it cannot be ignored, and the city is now aware of it.



My question is this - even if the seller accepts a counter-offer that takes into account the full cost of fixing and bringing the property up to code, is there any way we'd qualify for a VA or FHA loan (VA is preferable, but I may not be able to obtain a certificate of eligibility within the necessary timeframe)? My gut and research say no, and I'd like to walk away with my only losses being the inspection costs. However, my realtor is encouraging me to go forward and counter-offer, then see what happens.



Any thoughts?
 
If the remodel is that extensive and unpermitted, no way you get a FHA/VA loan. You might have trouble getting a conventional loan.



Even ignoring that, you probably don't want to buy that house. If they didn't get a permit, especially for something that extensive, the workmanship might be substandard and unsafe. You would have problems getting your insurance to pay for any damage, for example caused by an electrical fire due to poor wiring. Plus, the city could come and condemn the entire house at any time they felt like it.



I'd walk away.



Now, if you plan on fixing everything later and low ball, you still won't get a normal FHA or VA loan. You'd have to go with a FHA 203k, which is mega-complicated, and there's no VA equivalent. FHA and VA require the house be livable and legal from day one.
 
Geotpf,



Thanks! Everything I've read tells me the same thing - I have no idea why my realtor is insisting we get an estimate for the tear down and rebuild and conter. I've heard that FHA and VA are very particular about the living conditions. I appreciate the advice and insight!
 
[quote author="CM_Dude" date=1250820163]Geotpf,



Thanks! Everything I've read tells me the same thing - I have no idea why my realtor is insisting we get an estimate for the tear down and rebuild and conter. I've heard that FHA and VA are very particular about the living conditions. I appreciate the advice and insight!</blockquote>


CM_Dude,



I would be careful listening to someone who is not a licensed professional.



I believe that there<strong> is </strong>an FHA program that can credit a buyer for said conditions.

You may want to speak with someone who does this (writes loans) for a living.

I've sent a PM to you with a contact. He can tell you definitively yes or no.



This link may help:

<strong><a href="http://www.hud.gov/offices/hsg/sfh/203k/203kabou.cfm">FHA 203(k) loan limitations and info</a></strong>



Congratulations, and good luck,

-IR2
 
[quote author="IrvineRealtor" date=1250820800][quote author="CM_Dude" date=1250820163]Geotpf,



Thanks! Everything I've read tells me the same thing - I have no idea why my realtor is insisting we get an estimate for the tear down and rebuild and conter. I've heard that FHA and VA are very particular about the living conditions. I appreciate the advice and insight!</blockquote>


CM_Dude,



I would be careful listening to someone who is not a licensed professional.



I believe that there<strong> is </strong>an FHA program that can credit a buyer for said conditions.

You may want to speak with someone who does this (writes loans) for a living.

I've sent a PM to you with a contact. He can tell you definitively yes or no.



This link may help:

<strong><a href="http://www.hud.gov/offices/hsg/sfh/203k/203kabou.cfm">FHA 203(k) loan limitations and info</a></strong>



Congratulations, and good luck,

-IR2</blockquote>


I mentioned FHA 203k loans in my post.
 
Geotpf and IR,



I spoke with the seller and they think they'll have no problem getting a cash buyer who won't care about the permits, build quality, foundation issues, etc. - so we're walking away. I did look into the FHA 203(k) program and it is a great option for those with a compliant seller and more time on their hands.



Thanks again - I appreciate the insight!
 
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