FHA Loans and illegal apt? 1st time home buyer

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FHA Loans and illegal apt? 1st time home buyer

Danica Estrada
New York, NY · Member since 2019 · 4 posts · 0 votes

We are looking to buy a 2 family home in Westchester, NY. City records state it’s a code 220

(2family) but in reality there is a 1st, 2nd and 3rd floor apt. All 3 floors have different entrances and they all have their own kitchen with gas stove.

In addition to the 3rd apt it has a 2 floor detached garage. The 2 floor garage was constructed with the house in the 1900s. But the current owner built an apt for himself on the second floor of that detached garage. The kitchen in the garage is also gas powered.

Now I'm looking into getting g an FHA loan.... I want to have an idea what kind of hurdles we'll have to face in our near future when an fha appraiser comes to check out the home.

This is our first time home purchase and I dunno what the process will be like.

Thank you in advance for all your advice.

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Alex Horelick
Real Estate Agent · Westchester County, NY · Member since 2017 · 73 posts · 48 votes
6y

Hi @Danica Estrada,


There are a couple tricks that can be used to get this through an appraisal but it's pretty much all going to come down to the personality of the appraiser that comes out! Some of these deals will go through with removing kitchen appliances like the range/stove to make it not a "kitchen". The above garage space can be a recreational room, etc. I've had this situation a couple of times and some appraisers will look the other way while others will not. FHA inspections include additional safety items such as peeling paint and stairway handrails, etc. I would recommend any contract you agree to include protections in case the property does not appraise - at which point you can get your deposit back or renegotiate. Feel free to reach out if you have any other questions and good luck!

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  • Francis Morris
    Member since 2018 · 45 posts · 12 votes
    6y

    Mamaroneck?

    0Reply
  • Alex Horelick
    Real Estate Agent · Westchester County, NY · Member since 2017 · 73 posts · 48 votes
    6y

    Hi @Danica Estrada,


    There are a couple tricks that can be used to get this through an appraisal but it's pretty much all going to come down to the personality of the appraiser that comes out! Some of these deals will go through with removing kitchen appliances like the range/stove to make it not a "kitchen". The above garage space can be a recreational room, etc. I've had this situation a couple of times and some appraisers will look the other way while others will not. FHA inspections include additional safety items such as peeling paint and stairway handrails, etc. I would recommend any contract you agree to include protections in case the property does not appraise - at which point you can get your deposit back or renegotiate. Feel free to reach out if you have any other questions and good luck!

    1Reply
  • Danica Estrada
    OP
    New York, NY · Member since 2019 · 4 posts · 0 votes
    6y

    @Francis Morris

    No, the property is in Yonkers.

    0Reply
  • Alexander V.
    United States · Member since 2019 · 52 posts · 76 votes
    6y

    @Danica Estrada, when you get a government loan, whether it be a VA loan or an FHA loan, the appraiser is technically required to address the legal use of the property. The full guidance for FHA loans is a colossal 1000+ page document called HUD 4000.1. That document says under zoning that the "FHA requires the Property to comply with all applicable zoning ordinances." If your property does not comply, then it has a last chance to be what is called "legal non-conforming," but that essentially requires that the property is non-conforming to zoning laws because it was built before the zoning laws took effect. In such a situation, the property is "grandfathered" into legal status even though it violates the zoning. If the owner simply built himself an apartment without getting the correct permit, then it was a violation of the zoning and FHA will not (or at least should not) give you a loan on the property as it stands.

    As @Alex Horelick said, you may be able to remove some appliances to make the kitchen not a "kitchen" according to the legal definition--that would render the unit not a "unit." But at that point, you're gambling on the appraiser's willingness to work with you to basically evade municipal codes, and I personally wouldn't take that bet.

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  • Danica Estrada
    OP
    New York, NY · Member since 2019 · 4 posts · 0 votes
    6y

    @Alex Horelick

    Thank you so much for that information. I’ll keep all that in mind.

    🙏🏼

    0Reply
  • Nicole Heasley Beitenman
    Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes
    6y

    I had a similar issue. I was trying to purchase a property formerly owned by my grandfather. The second floor had a tiny kitchenette and external entrance added prior to my grandfather purchasing it, and they wanted to call it a duplex even though it was zoned SF and not separately metered. If anything, it was an in-law suite. The property has changed hands at least twice since the kitchenette was added, and I just happened to get the one crapbag appraiser who wanted to be difficult about a stove and a fridge on the 2nd floor. My lender and realtor helped talk him down. If they hadn't, I probably would have had to get another appraisal.

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  • Jared W SmithBusiness Member
    Architect · Westchester County, NY · Member since 2018 · 682 posts · 476 votes
    6y

    I think others have summed it up well. With FHA, they may flag the additional units as non compliant.

    @Alexander V. I know Yonkers very well. Highly unlikely for a existing non-conformance 4-family to be in a 2-family zone. 

    @Danica Estrada Did you get my email from last week??

    Jared W. Smith, RA

    Principal Architect - Architect Owl

    Architect Owl PLLC521 Reviews
    WebsiteView Page
    0Reply
  • Mike Yerardi
    Flipper/Rehabber · Hudson, MA · Member since 2014 · 16 posts · 3 votes
    4y

    I have a property with an inlaw that has been there since the home was built in the 70's. Old green oven and cooktop. When the the house was built the inlaw was not on the permit. It has a slider out to a deck but the front entrance is through the main house kitchen and not right to the outside.  We didn't think about this because everything looks original to when the home was built. We have the house sold to a conventional buyer and have not had the appraisal yet. Wondering if I should be worried about the appraisal or does removing the stove help? 

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