We have done some renovations to increase value and functionality as potential rental property.

In many cases, thoughtful function (laundry, storage, efficient flow) beats raw square footage for this renter profile.Curious how others are adapting their buy box — are you still prioritizing larger unit mixes, or seeing similar demand around smaller, well-positioned units?

Also stage that converted garage space better - home office, gym, whatever shows clear function.

Sometimes it’s layout, functional obsolescence, deferred maintenance, or simply buyer pool depth at that price tier. 

I’m looking for some insight on how to structure an offer on a Fannie Mae REO I’m interested in, especially given some discrepancies in how the property is being represented.Key facts:Current listing: Advertised as a 3 bed / 1 bath at 1,850 sf.Issue: That square footage appears to include a partially finished basement, including a “room” with no proper egress, so it should not be counted as a legal bedroom or finished living area.Prior listing (2021): Previously listed as a 3/1 at 1,572 sf.Fannie/FNMA record: Federal National Mortgage Association currently has it as a 2/1 at 1,368 sf, which is much closer to reality based on what I’ve seen.Pricing history:Sold 7/14/2021 for $450,000.Trustee’s Deed consideration amount: $347,000 dated 10/18/2024.REO list price started at $489,900, then dropped around 2/16/2026 to $484,900.First Look: First Look period expired on 2/20/2026 at 21:00, so investors can now submit offers.My main concerns:The current list price seems to be based on an inflated square footage (counting the basement as living space) and as if it’s a 3/1, when in reality it’s functionally a 2/1 with a partially finished basement.Comps in the area should really be adjusted to the ~1,368 sf, 2/1 configuration, not 1,850 sf, 3/1.Fannie paid effectively $347K (per the Trustee’s Deed), but is trying to list it close to or above what it sold for in 2021, when it was arguably misrepresented then too.What I’m thinking:Have my agent pull comps based on 2/1 and ~1,368 sf only, ignoring the basement as finished living area, and value the property that way.Back into my maximum offer using:ARV for a 2/1 at ~1,368 sf.Less repairs/updates needed.Less my desired profit and holding costs.Use the misrepresentation of square footage and non‑egress “bedroom” as leverage, both in the initial offer and during any inspection/renegotiation.Questions for the community:For those who have bought Fannie Mae REOs recently, how aggressive can I realistically be on price once First Look has expired?

I want to bring Unit A up to $940 to match Unit B’s base rate.The Risk:The building has deferred maintenance (siding and roof issues) that no immediate attention needed but they are heading to the end of their useable life and I’m planning to address "as I go" since everything is currently functional.

They want to sit comfortably without feeling like they are in a staged showroom.When a property photographs better than it functions, reviews start to reflect it.

Systems over transactions.This doesn’t mean every function must be internalized to succeed.

Functionally, it operates as a quad.When I attempted to refinance, the appraiser and lender would not proceed because:The property is zoned R-4, andThe previous owner renovated the building without pulling new permits.As a result, the lender will not treat it as a legal 4-unit, and financing has stalled.I’m trying to do this the right way and stay compliant while also unlocking funding.Questions for the group:1) What’s the best way to rectify this—rezoning, variance, special exception, or legal non-conforming use?

The market is functioning again — just at a more rational pace.