ASSIGNMENT:

This borrower was referred to us by a realtor with whom we had met on a previous transaction. The investor was exercising his 1031 exchange on this purchase and apparently, he even had tried to buy the subject property before but the seller had changed their minds in selling.  Now he was back in trying to buy but the seller had increased the sales price.

CHALLENGE:

This was a small apartment building in desert hot springs that was marketed for the seller as a 6 unit building. Our first red flag was when we pulled a property profile which referenced the property as a 5 unit building and then when the appraiser went to the building this is where we all learned that there was a non-conforming 6th unit. The sellers had no permits for this unit. This became a problem since we could not count the income from this unit.  The appraiser was also going to have to mention this in his report and appraise as a 5 unit building which was going to negatively impact the property valuation.

SOLUTION:

There was nothing that we could do with regards to the boot legged unit, we presented the findings to the sellers agent and informed them that if they were willing to call the city to have a building inspector come out and inspect and confirm whether or not the unit was legal then the appraiser would accept this or otherwise we would have to treat it as a 5 unit building. The seller did not want to go down this pathway which opened the door for our client to have his agent negotiate a lower sales price.  We closed the deal and the selling agent already referred to us a potential new loan for one of her apartment listings. :)