Effect of 3 fam use in 2 fam building on appraisal?
We have an accepted offer on a “fixer-upper†in habitable shape, and are really nervous about the appraisal process. Forgive me if these are rookie questions, but this is our first house. The first issue that makes us nervous is that the building has a CofO for 2 fam, but is currently set up as…
We have an accepted offer on a “fixer-upper†in habitable shape, and are really nervous about the appraisal process. Forgive me if these are rookie questions, but this is our first house. The first issue that makes us nervous is that the building has a CofO for 2 fam, but is currently set up as a 3 fam (sort-of –I’ll explain). The questionable “unit†has no bathroom with direct access to the unit, but it does have a tiny, but complete kitchen (stove, sink, fridge). The bathroom opens to the common hallway. We intend to use it as a 2 family. I’ve seen posts about nonconforming uses, so I don’t think this situation is unusual. However, none of those posts address the appraisal issue. Have any of you obtained a mortgage in this situation?
The second issue is that there is some unfinished work. Specifically, one bathroom has no ceiling. The good news is that we can see the work that needs to be done up there. The bad news is that it looks scarey to an appraiser. These are problems that any buyer would face, so you’d expect the seller to want to remedy them. Again, we’re prepared to do a lot of work to the house, but we’re worried about the appraisal.
Thanks for any advice and experience you can offer.
This is a bit off topic, but you may be interested to know that many two families in Eastern Brooklyn were set up with the bathroom “across” the hall — that is, each family had a floor (or floors) with no doors separating the units from the common hall.
I know exactly which house this is. The parlor was lovely. It’s a very “homey” building.
Are you by any chance going to 203k this house to get some reno cash when you close? If you are, you can skirt many of these appraisal issues as your appraisal will be for the “after work” value.
Obviously there are ups and downs with the FHA loan so do your research.
PS. Get an inspection! My advice, which should be taken with a grain of salt: Fix the heating system and wiring ASAP (fire hazard!). If you talk to the caretaker, she’ll tell you whats going on (almost TMI). Also bleed those rad’s and do whatever you need to do to keep them from leaking on the floors (the floor is coming up at every single one from the water).
PPS. Stay safe. Your new house and neighborhood have great potential, but the latter, like the former, is a little rough around the edges.
Remove the stove, and make sure that the ceiling is fixed.
If the appraiser takes photos of the unfinished ceiling and any other damage/unfinished areas of the house the bank will most likely ask for them to be fixed/completed. This will require a re-inspection/completion report. They will not let you close as is. Until recently some banks would let you close with money in escrow. That money would have been released back to you after closing, after the repairs were made. You can try asking but from my experience no lenders are allowing you to close with money in escrow anymore.
The extra kitchen is a more important issue. I have seen at times banks allowing a partial kitchen, you could make the case that’s a “wet bar” or an English kitchen but I really wouldn’t count on it.
My 2 cents.
Adam Dahill
WCS Lending
adahill@wcslending.com
worst case is that you remove stove and fridge for inspection.
I bought a 6 family building which has much stricter guidelines than a 2-3 fam, and it had something similar to what you described. It’s a legal 6 but someone built himself a living quarter in the basement (which made it a 7th). Appraiser didn’t even blink at it. I wouldn’t be worried if I were you.