I viewed a Houston, TX area listing for a 2 bedroom/1 bath recently and discovered that the house is actually a 3 bedroom due to a converted garage that was most likely done without permitting. I assume they wished to hide the conversion because there is a dummy garage door at the front of the house. The agent listed as 2 bedrooms only per appraisal district record.
I am not sure whether I wish to flip or rent this house, but I am leaning toward using it as a rental for a few years and selling later.
Should my offer be accepted, my gut says that I should convert the "bedroom" back to a garage and rent/flip as a 2 bedroom.
I am interested to know if others would do the same. Also, should I get some leverage in negotiating with the seller due to the fact that the improvement is most likely unpermitted?
Oh yea, I will milk this sucker for every penny its worth. Find out first if it truly is an illegal conversion. If it is, I would have the seller reduce the price because I refuse to pay for a 3 bedroom house when its really a 2 bedroom.
If he does reduce it then we go off into closing. If you want to flip then you have to officially list it as a 2 bedroom house unless you add a legit 3rd bedroom to the house. However, if you want to rent it, I would leave the house as it is, no changes and list it as a 3 bedroom house.
As long as the illegal conversion has a window for escape during fires and you have a smoke detector in that room, its a bedroom. If you want to make it a "legit" 3rd bedroom, build a closet space.
Personally for me I would rent it out rather than flip it.
We're Texas, not California or New Jersey. We mostly don't care about previous unpermitted work here. If you sent me a reduced offer based on previous unpermitted work, I'd just laugh while I review the other six offers on my property.
I'd wager that over 70% of garage conversions weren't done with permits. That in no way means they're poor quality work, it means we don't think government needs to be involved in every aspect of our lives. If building inspectors were actually any good at what they do, they'd make a ton more money as construction project managers. The industry mainly tends to attract guys who failed in construction, but like to tell other people what to do and like to have people suck up to them all day. I honestly can't think of a single time a building inspector pointed something out on one of my projects that actually made a difference to the consumer.
Thanks for the replies. I agree @michael regarding inspectors. This seller doesn't have a stack of offers though. This is second time this year she's tried to sell house and DOM this time is about 65 so far. ARV for neighborhood is about 100/sq ft and she wants 85/sq ft. House has significant foundation issues and no heat. Everything else is minor. I want to offer about 65/sq ft. I just don't know if I should mention fact that garage conversion is not permitted. It does have a closet and a window by the way and a deck floor to make floor height even with adjacent room.
Offer according to your financial needs. This is the type of property where I would expect to get my price or walk away, no negotiating.
If I purchased it I would apply to get the additional room permitted, if not successful would convert back to garage.
Garage conversions are very common in the Houston area. I personally don't like them. I think they're tacky.
But it's my understanding that if you're not actually making a structural change to the home, then a building permit is not required. With a garage conversion, all you're doing is throwing up some walls and creating a closet. You'll also need some point of egress to officially make it a bedroom.
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