Convert 5 units to 4 units

[Grayson Hussey]

Hey everyone. I found a property that is five units, but the seller is renovating one of the units and the listing says that it could be converted to a laundry room instead. This would be the only way I could get the property because I will be using a VA or FHA loan. The problem is that I have no idea how this would be properly documented and verified. I also have no idea what authorities would sign off, nor which parties would need to take what actions in order to go through the process.

Can anyone shine some light on the situation?

Thanks!

P.S. Bonus points if you can offer guidance on how to go back to five units... legally, of course.

[James C.]

Grayson, 

A CO is a certificate of occupancy. It sometimes has different names. it's generally issued by the city/town government and details the number of units in the building allowed by the city/town. 

Theoretically, the building you are buying is legally 5 units at the town. You should check, very discretely, to be sure it's a 5 and not really a 4 with an illegal unit. If you find it's only a 4, then you need to reevaluate. It could  be grandfathered, so keep that in mind.

What you want to have happen is that your appraiser indicates on the appraisal that it is a four unit. Since you want to put the other unit back in service at some point in the future,  you want the city/town records to show 5 (or grandfathered ).

You don't want to have the city/town change it to 4 because then you have to have the city/town re certify it for 5, which is a ROYAL PAIN.

The best thing to do is stuff it (unit 5) full of boxes of stuff, put a sign on the door that says "private", "storage" or "no entry" and ONLY show it to the appraiser if he asks. All, and I mean all, of the paperwork, including the MLS listing needs to say 4 units.

Hope that helps and makes things clearer. 

Good luck,

Jim