On Oahu, it is not uncommon to find your perfect property with an unpermitted improvement or an unpermitted addition. Trying to purchase unpermitted residential property can be challenging, especially if a loan is necessary to purchase the property. Lenders have different criteria for qualifying properties.
Conventional and portfolio loans are less stringent and more flexible than say, a USDA or VA loan package. These are questions local lenders will ask when purchasing an unpermitted single-family home in an agriculture zone:
- Is the property move-in ready?
- Are there safety issues?
- What is the ratio of unpermitted to permitted square footage?
Unpermitted 2nd full kitchen
Unpermitted And …
Unpermitted and… agricultural or preservation zoned or maybe bank-owned can be a bit more difficult to finance but is very much worthy of financing and of a good fight. If the property is bank-owned, chances of property disclosures and other pertinent information could be lost or unknown.
Your lender wants to know:
- Is the size and number of bedrooms right for the size of the waste system?
- Is the type of waste system (cesspool, septic, sewer) sufficiently upgraded to accommodate the new residents?
Be sure to ask as many questions of the seller or the seller’s agent as possible. If the information is not easily available, there are ways to find the necessary information-see the resources below.
Why Buy Unpermitted Residential Properties?
- If you love the property and the unpermitted area is not a concern or problem.
- For the price. The unpermitted area is not legal, sellers cannot consider the unpermitted area in the total square footage and should not be reflected in the selling price.
- For the land/location.
If a lender denies financing due to permit status, one of the following should satisfy the lender:
- Remedy the permit by retro-permitting, securing property permit(s) on your own or hire a professional, or
- Remove unpermitted area(s). Removing the questionable area can be as easy as demolishing a small (perhaps unsafe or not-to-code) bedroom or as difficult as tearing down most of the dwelling.
Unpermitted bedroom within a bedroom
Now go out and find that great deal, that not-so-intimidated listing, that unpermitted residential property… your perfect property. Do some research and work with a patient lender!