I am in the process of purchasing a house to "live in flip" that I just found out is "uninhabitable" according to the appraiser that the lender sent for the inspection. I knew the house needed work at the time and expected plumbing and electrical to need work.

We have made it to "underwriting process" and Unfortunately, according to my banker, when the appraiser went onsite he had no electricity (the meter was not installed) and no plumbing, so they cannot lend on the property and will have to "set my file aside" until I get an appraisal for current price, a general contractor for quotes to see the ARV and then go from there.

I had planned on doing the repairs myself as I currently already have a free place to live while I work on and eventually move into this property.

Am I out of luck in this situation? Is my only option to get an appraiser and general contractor onsite and add a 203k onto the loan?

TL:DR - during appraisal before underwriting the lender said I have to get an appraiser and general contractor on-site for 203k loan and ARV. so they can loan on that amount. What Would You Do? Find another lender? Creative financing? Sell the left side of my lungs and pay cash?

Cash, hard/private money or seller financing seem to be the potential options here.  

Hard money to get in, conventional financing to pull money out when the work is completed.

Hard money won't be an option since you're intent is to live in the property

@Mark James II , you can hard money into it, live elsewhere while fixing it up to habitability, then refi into a traditional loan when it is habitable. 

Hard money doesn't lend to owner occupants, and you may have to wait 6 months to refi. Look into delayed financing, @Alexander Felice can you speak to delayed financing?

Originally posted by @Mindy Jensen :

@Mark James II , you can hard money into it, live elsewhere while fixing it up to habitability, then refi into a traditional loan when it is habitable. 

Hard money doesn't lend to owner occupants, and you may have to wait 6 months to refi. Look into delayed financing, @Alexander Felice can you speak to delayed financing?

can't do delayed finance with hard money, has to be arms-reach funds. 

private money might be an option but the best option, if your'e going to live in the place, is find something that you can live in 

@Mark James II

I would dig deeper. Find out exactly from the appraiser what the property needs to qualify as livable. Perhaps you can get it to that standard with a couple quick fixes.

If so get permission from the seller in writing and make it happen. Extend your closing time if you need to. And choose a new lender.



Seller will have same problem with another buyer. Ask for seller financing.

Thank you all for the replies and confirmations!

With the way everything is working out, we are probably going to have to pass on this one. 

I sent an E-mail to the seller to see if the bank would be interested in seller financing or getting creative. 

Here are links to a matterport scan I took after getting the offer accepted. If nothing goes through with this for me, hopefully, someone here can pick it up and make some money off of it.

This house is deemed "uninhabitable" - $140k.   I would be curious to know what everyones thoughts are of this deal if anyone looks into it. 
This is the main house - https://my.matterport.com/show/?m=EWmfRVSMGkb
Since I took them on separate days, they are not in the same scan
This is the second house/workshop - https://my.matterport.com/show/?m=pcSoSq4MLCc

That house isn't too bad; as you stated it needs plumbing and electrical, a good cleaning and paint.  Not too bad of a renovation, in terms of cost to repair.  Private money or hard money would be needed.  Conventional lenders cannot lend against a house that has loose wires, holes in the walls or floors, damage to sheetrock, etc. 

You have to assume that rewiring is needed; you have to assume all plumbing is shot. Build your offer that way. Look at your local REIA, and ask if anyone knows someone who makes hard money loans in your local community.