We're selling: will buyers be able to get a mortgage with lien?

5 Replies


My wife and I are in the process of selling our house in Delray Beach, Florida. We bought it back in 2015 without knowing that there was an un-permitted addition where the carport had been turned into another bedroom/storage room. We didn't have any problems with the title company or the bank getting a mortgage. I guess they did not know or find out that the addition didn't have a permit. 

Fast forward to today and we had the house under contract to sell. All of a sudden the buyer backs out and we get a letter from the city saying that someone reported us for having an un-permitted addition plus some other issues (which the city later dropped). 

Since this has to be disclosed and shows up as a lien on the property, will banks refuse a mortgage for a potential buyer even though we have a permit underway? We are now getting a lot of crazy low offers from cash buyers who see it as a quick flip, but obviously we don't want to sell it at their low price. Would our best option be to do the work and sell it later? 

Other info: we currently live overseas which makes the situation pretty tough to manage. We have had an engineer come out to open up the walls and estimate costs. He said it would be 10-12k to bring everything up to code and overseen by general contractor. We had an offer for 195k, but now we are getting offers of 130k which seems a crazy discrepancy considering we have a legit estimate of what it would cost to fix. The good news is that the City of Delray Beach has been very accommodating and open with what needs to be done. 

Any advice on the situation would be greatly appreciated. 


Ole Midtbo

It is what it is...a mortgage lender will not lend on property that has a code violation.  Have you asked about seeking a variance on the addition?  It would involve having the city's construction services people do an inspection of the addition to note code issues - and then seeking a variance to "grandfather" in the addition.  This is a common occurrence in South Tampa and the Variance Board might be a good alternative to the other solutions.  

Thank you for the response Patricia. That's what I was fearing about the mortgage lenders. 

Had not thought about a Variance board and it definitely is a good option to examine further. As it is a common occurrence in Tampa, do you have any experience with them actually allowing the variance to be grandfathered in? 

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@Patricia Steiner @Ole Midtbo  There is no such thing as gaining a variance to grandfather, unless this is a Florida-specific application. You attain a variance for non-conforming construction. Grandfathered construction is already non-conforming but was built and completed prior to a set of laws/codes being enacted. You can't gain grandfathering after the fact. You either have it or you don't. Unless this addition is 40-50+ years old, it is more likely not grandfathered. 

Going to the variance board is advisable depending on what's non-conforming and if they're likely to allow it. Otherwise your other option is to get various trades to sign off on their respective components (Plumbing, Electrical, HVAC, Structure, etc.). If your engineer is not privy to how this works, then retain a local architect whom can walk you through this process.  

I'm going to play devils advocate- did you purchase title insurance when you purchased home in 2015? Have you contacted your real estate attorney? This seems to be something that was missed and now has severely hindered you in your resale which should be compensated. Were you given a Certificate of Occupancy (or similar) at closing? This should have shown the addition, legalized. Owners need to make sure they get this document.

Jared Smith, RA

Disclaimer: I am an architect, but I am not YOUR architect. I am not giving professional advice only general information. Contact a local architect/engineer for a detailed consultation specific to your project/locale.

@Jared W Smith Thank you for your response. 

Yes we did speak with an attorney regarding our case, and others have mentioned the title insurance angle, however we were advised that it would be very difficult to get anything off the title insurance company. 

I will definitely look for the Certificate of Occupancy as it would be good to see if its listed there like you said. If it is listed there, what would be our best course of action?

We did get an offer now with FHA financing, and our agent wants us to accept, but I am unsure as it feels like we are just wasting our time. From what I've read, FHA is unlikely to accept the conditions of the house. Hoping I'm wrong, but not holding my breath.

@Ole Midtbo if the addition is on the Certificate, then you have recourse in it's legality. You can then provide this proof to the City and have a leg to stand on. Otherwise if it is not, proceed as necessary to attain sign-off of everything.