Permits required for cash out refi?

Question

We are 95% finished fully rehabbing (foundation, roof, plumbing, electrical, etc) an investment SFR bought with cash and intend to cash out refinance after the 6 months required (so we don't have to do delayed financing).

When we start the refi process, will banks require proof of permitting for things like foundation and electrical work? Must we close out/get inspections for the work we have done before we start the refi process? How will they know exactly what work we actually did vs. what could have been done already?

Thanks for any help you can provide!

Isabel Owen · Answer

thanks for all replies here, just wanted to provide an update now that we have completed the cash out refi process: after doing a full remodel, foundation to roof, the bank did not request any proof of permitting at all. We did a conventional investment loan.

John-Michael Moreno · Answer

@Isabel Owen Thank you for coming back and sharing what ultimately transpired. Good info.

Jackelyn Gonzalez · Answer

I don't know what the bank would require. But if there are any issues you can look at private money financing. Typically higher rates, but tend to close faster 10 business day time frame which would allow you to start recycling your money earlier. In the end rate may not make a difference depending on hold time and profits.

Isabel Owen · Answer

@Michael Herr Thanks, yes, that is exactly what happened on my fha 203k to conventional. I'm wondering if anyone has had that same experience with cash to conventional.

thanks again!

Michael Herr · Answer

What you are saying here doesn't disagree with my statement. For a loan being sold on secondary market, the banker cannot communicate directly with the person performing the appraisal before the appraisal is complete. (Not sure about after)

My point was more trying to answer the "how does appraiser know what works was done" issues.

Can they make a requirement (like permits) that gets relayed to an appraiser? Probably. Seems like you have an example of that happening.

Isabel Owen · Answer

@Michael Herr

Thanks - the bank can definitely talk to the appraisal management company. On my last refi, the bank told the AMC to get the appraiser to ensure we pulled permits. I am hoping this was unique to the FHA 203K to Conventional refinance (no cash out) as my current project is going to be cash to Conventional (with cash out).

Michael Herr · Answer

The banker can't talk to the appraiser, but you can. Make sure they know all the reasons it was disciunted when you bought it and worth alot more now.

Make sure to talk up all the work you did, come in armed with info.

I gave my scope of work to the last appraiser.

Look up the comps. Know (and make it come out in conversation) the issues with the lowest price sales that could be used as comps.

Jerry Padilla · Answer

FHA rehab loans are different than conventional. I personally haven't experienced our underwriting dept asking for it. It was because you originally had a rehab loan. The appraiser can ask for any documentation they want to and then underwriting will require it.

@Isabel Owen

Isabel Owen · Answer

@Jerry Padilla

Any chance the appraiser will ask for proof of permitting? I ask because on our last refinance after rehab (from FHA 203k to conventional) the bank DID ask the appraiser to get permits from us even after the appraisal was complete. I didn't know if this was specific to the circumstance because the appraiser had to prove the drastic increase in value or if it was commonplace.

Isabel Owen · Answer

@Daria B. That's what I'm hoping. Does anyone else have insight into this?