@Isaac Passmore,
This is a tough situation—but not an impossible one.
The real issue here isn’t just the appraisal or the illegal stove. The deeper problem is regulatory: hard money lenders legally cannot fund loans on owner-occupied primary residences due to federal consumer protection laws. That includes Truth in Lending, Dodd-Frank, and the Ability-to-Repay Rule. But also they don’t want to because it puts them at extremely high risk because it’s very difficult to close the property when it’s someone’s primary residence. Because the courts dragged out the foreclosure process for several years. The investor loses a lot of money if the borrower stops paying.
So unless the buyer has another place to live in Maryland and can classify the property as an investment, hard money is a no-go. The seller’s refusal to remove the stove further blocks traditional financing until that violation is fixed.
That said—there are still several viable options, especially if you get creative and move fast:
Option 1: Lease with Option to Buy (Fastest + Easiest)
- Sign a 6- to 12-month lease agreement with the seller.
- Pay an option fee (3–5%) that applies to the future purchase.
- Use the lease term to remove the stove, resolve zoning, and secure a traditional loan (FHA or conventional).
- Close using standard owner-occupied financing once the property qualifies.
Why it works:
- - Avoids appraisal headaches now.
- - Gets you into the property fast.
- - Gives you full legal occupancy to fix the issue.
- - Seller gets monthly rent + security via the option agreement.
Option 2: Claim Investment Status Using Alternate Maryland Address
If you can’t go the primary route:
- Use a friend or family member’s Maryland address as your legal residence.
- Sign an affidavit of non-owner occupancy at closing.
- Close using a business-purpose loan (via an LLC or personal name).
- Lease the subject property to yourself or another tenant.
- Refinance into a primary residence loan later.
Note: This works if the intent is truly to treat the property as a business/investment. Be consistent across documents—no mixed signals.
Option 3: FHA 203(k) or Fannie Mae Homestyle Renovation Loan
If there’s enough time and you want to go fully conventional:
- These programs allow you to finance both the purchase and renovations.
- Work with an approved contractor to remove the stove and make any other fixes.
- FHA allows as little as 3.5% down; Homestyle requires 5%.
Downside: You need 30–60 days, lender familiarity, and a clear contractor plan. Probably not fast enough for your April 30th closing unless already started.
Option 4: Have a Partner’s LLC Close, Then Lease and Refinance
- Bring in a trusted partner who already owns property in Maryland.
- They buy the property using their LLC and business-purpose financing.
- You lease the property from them, fix the issue, then refinance it into your name once eligible.
Good for: Quick close, avoids occupancy complications, protects the deal and opens doors later.
Bottom Line
If time is tight and you want to retain primary occupancy status without fraud or gray areas, the Lease with Option to Buy is your best play. It’s legal, simple, and gives you control without lender entanglements upfront.
Let me know if you you need any help with a local attorney to draw up a lease-option contract, or a conference call or letter with the seller to explain the approach, or even just a quick legal checklist to stay clean.
Good luck!
Jim
