REO property that has no permit on addition

[Vicky Yu]

Newbie here, I just bought a SFR in N CA from Fannie Mae. It's a 3 br 2bth as well as addition(2 br right on the patio, attached to the house). Seems to me a lot of REOs in my area are like this. I just want to know if it's ok to rent it out like this. I mean more brs will help with cash flow but what happens if there is a fire that starts in the additional unit with no permit? Will insurance still cover? Does anyone have experience with this? I would love to hear from you. Thanks in advance!

[Bienes Raices]

Originally posted by Vicky Yu:

Newbie here, I just bought a SFR in N CA from Fannie Mae. It's a 3 br 2bth as well as addition(2 br right on the patio, attached to the house). Seems to me a lot of REOs in my area are like this. I just want to know if it's ok to rent it out like this. I mean more brs will help with cash flow but what happens if there is a fire that starts in the additional unit with no permit? Will insurance still cover? Does anyone have experience with this? I would love to hear from you. Thanks in advance!

I've never had an insurance agent ask about permits before writing the policy. I don't think they could refuse to cover an event in the addition if they were willing to write the policy in the first place. If you are concerned, you could use a circuit tester to see if the receptacles in the addition are wired correctly, and have an electrician come out. However, that might open up a new can of worms if an extensive problem is found, because then you would have knowledge of it.

I think the real issue might be when you sell the house, if your buyer demands that the room be brought up to code, or wants a price reduction. But if these kinds of additions are the norm in your area it may be a non-issue.