FHA Loan for Duplex with illegal unit near Chicago

Buying & Selling Real Estate
5yFollow

FHA Loan for Duplex with illegal unit near Chicago

Kathrina Briones
New to Real Estate · Chicago, IL · Member since 2018 · 9 posts · 2 votes

Hey BP! Real estate rookie here posting for the first time! I have 2 questions for you:

1. I'm about to put in my very first offer on my first property! But I'm looking for insight on something that came up. The property is a duplex for $290k and the owner revealed that the rear 1bdrm as an illegal unit, so it's being classified as a 3bd/2bath single family. I don't want to deal with liabilities of an illegal unit so my idea is to just use as an Airbnb or STR. Also it's in an excellent location next to the highway and train line with lots of MFH (Forest Park) so I don't know why it couldn't be zoned multifamily.... Should I just try to appeal to the alderman or something? Should I just leave it as an ADU?

2. I'm using an FHA loan and my realtor said I need to remove the rear unit stove and cap the gas line to pass the inspection. Will this work? Anyone want to share their experiences with illegal units and FHA loans?

Thanks in advance for any insight, BP has been a fantastic resource!

1Reply
56 views

12 Replies

Jump to latestLatest
  • John Warren
    Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
    5y

    @Kathrina Briones Forest Park is very strict about zoning and this doesn't work like the city at all. You will not have any success getting this grandfathered in if they said this is a single family. Airbnb is a much better option, but just make sure you are not over paying for a single family home just to buy something. I love Forest Park and many of my clients have done well there, but have your agent get you comps for single family homes and not 2 units. 

    You can definitely get this through as a single family from the lending side if you cap the gas. That isn't an issue. Just make sure the value is there to appraise as a single family. 

    0Reply
  • Kathrina Briones
    OP
    New to Real Estate · Chicago, IL · Member since 2018 · 9 posts · 2 votes
    5y

    @John Warren Thank you for the feedback and comp advice, I'll take a look at SFH again in the area. Much appreciated!

    0Reply
  • Jonathan KlemmBusiness Member
    Moderator
    Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
    5y

    @Kathrina Briones - @John Warren nailed it and knows that area well.  Illegal units are super common in the city so I am glad he chimed in first to let you know Forest Park is strict.

    I will echo the fact that it sounds like you have some leverage.  I'd get the property under contract, request to pull the actual zoning cert, and then negotiate the seller down.  Assuming you have a good realtor, I am sure they are all over it.

    [email protected]
    Quality Builders4.966 Reviews
    WebsiteView Page
    0Reply
  • Kathrina Briones
    OP
    New to Real Estate · Chicago, IL · Member since 2018 · 9 posts · 2 votes
    5y

    @Jonathan Klemm thanks for the input! We're looking to put in an offer of $270k. Comps are all over the place in such a small area with such a mix of fixer uppers and luxury/renovated homes within a few blocks of the property. It's in the southern part of Forest Park, Thomas and Roosevelt. For a 3 bed/2bath SFH that needs some updating do you think I should go lower? She is very motivated to sell, she's had the property for 30 years and is just done with landlording.

    1Reply
  • Jonathan KlemmBusiness Member
    Moderator
    Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
    5y

    @Kathrina Briones - It can't hurt to go lower unless you are in a multiple offer situation.  Your realtor should be able to base the comps off the actual condition of the property.

    I always like to find out why they are selling?

    [email protected]
    Quality Builders4.966 Reviews
    WebsiteView Page
    0Reply
  • Kathrina Briones
    OP
    New to Real Estate · Chicago, IL · Member since 2018 · 9 posts · 2 votes
    5y

    @Jonathan Klemm I'll ask my realtor to find out why she is selling. We put our offer in and she responded that she has two more showings on Saturday and then she will let us know later that day. Maybe she's not in a haggling mood...

    0Reply
  • Jonathan KlemmBusiness Member
    Moderator
    Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
    5y

    @Kathrina Briones - Let us know how it goes!  

    You always want to get as much information from the seller/realtor.  Then figure out what information can be leveraged to help you negotiate.

    [email protected]
    Quality Builders4.966 Reviews
    WebsiteView Page
    0Reply
  • Kathrina Briones
    OP
    New to Real Estate · Chicago, IL · Member since 2018 · 9 posts · 2 votes
    5y

    @Jonathan Klemm That makes sense. The seller was very confusing when we asked and wasn't 100% sure with her decision to sell. She just said if it sells awesome but if it doesn't I'm taking it off the market. She didn't want to "play any games" so she made a counter offer of $275k and we accepted! Now I'm going to start scheduling inspections. 

    Another question, because of the legality issue of the rear unit, she mentioned it would be best to go with an attorney that's more familiar with Forest Park zoning laws. Do you know what issues might come up during the closing process? Do you or @John Warren have any recommendations on attorneys familiar with Forest Park? 

    Thank you again for all your insight!

    0Reply
  • John Warren
    Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
    5y

    @Kathrina Briones yes I can make an introduction. I would ask your realtor who they normally use though as they probably have someone. With Forest Park you want to make sure you have the point of sale inspection in hand so you know what the village requires. I would do that before scheduling an inspection unless they are delivering the building compliant. 

    0Reply
  • Kathrina Briones
    OP
    New to Real Estate · Chicago, IL · Member since 2018 · 9 posts · 2 votes
    5y

    @John Warren apologies for the delay, it's been hectic around here. My realtor did have someone that could help, thank you so much for offering though! The seller gave us the inspection as well, did I need to show it to the inspector? 

    0Reply
  • John Warren
    Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
    5y

    @Kathrina Briones definitely consult with your whole team about each step of the process. When you get that inspection you want to make sure you show it to the inspector as your inspector can help unpack a lot of the things in the inspection. Your attorney will also provide value here if you have a good RE attorney. 

    0Reply
  • Kathrina Briones
    OP
    New to Real Estate · Chicago, IL · Member since 2018 · 9 posts · 2 votes
    5y

    That makes sense. Thanks again John and Jonathan for the insight, it was very helpful! 

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free