Unpermitted Residential Property

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:

  1. Remedy the permit by retro-permitting, securing property permit(s) on your own or hire a professional, or
  2. 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

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!

Helpful Resources

Hire an after-the-fact specialist.
Apply for a residential permit on Oahu.
Order a permit package.
Test for asbestos, mold or lead.

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Lilia Hall

October 9, 2017

Thanks for the information! I’ve overlooked properties we’ve really loved due to unpermitted areas and the trouble it can cause securing lending. But now I think we will research more if we come across another property with unpermitted additions that we absolutely love!


October 9, 2017

Great article! Appreciate the insider knowledge!


October 10, 2017

This information is extremely helpful especially for the 1st time home buyer. So many times someone will come across a property they love but are stopped in their tracks finding out their dream home is not what it appears to be. The work performed could be perfectly fine but not permitted. Knowing that the work can be retro-permitted is a helpful tool to know about. Thank you for providing the above information as we feel more comfortable now that we have additional information and tools to use in our quest for a home.


October 10, 2017

This article is great for prospective home-owners! I appreciate your insider knowledge and tips to find that perfect property! Mahalo!


October 10, 2017

Thank you for sharing your insights. Prior to your excellent post, I wondered how some properties with unpermitted areas may be able to bypass potential hiccups when placing properties on the market.


October 11, 2017

Wow. I never knew any of this, it’s good to know. Thank you for the insightful information.

I had started the first time home owner process close to the beginning of this year because I was curious to know where I stood and where I wanted to be when I’m truly ready to buy.

Next time around, I’m going to trust my gut and hit you up D because I know I’ll get someone with the “heart of a teacher” as Dave Ramsey says.


October 11, 2017

How important and very informative. Thank you for thoroughly explaining this. We’ll be in contact.

Travis matthews

November 13, 2017

Wow, your blog is very well written Doreen and covers quite a bit. I think your main point you’re trying to get across is that there’s so much to know that it’s best to seek advice from a realtor expert such as yourself. That way when you come across a property with unpermitted areas, you will know if you found a home worth buying.


November 13, 2017

Thank you Travis for your kind words!

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