We have two retired borrowers refinancing their property in Berkeley – a quaint older home with an in-law in back. The in-law unit is a cute little, detached cottage that does not detract from the property in any way, and it also generates $900 per month in rent. The cottage itself is in great condition.
In the rational and real world, such a cottage can only enhance market value. But, in today’s world of Fannie Mae insanity, an un-permitted cottage can kill a transaction altogether.
Fortunately, our borrowers had the good sense to be aware of this risk, and they convinced the appraiser that the cottage was just a “storage shed”. Appraisers and lenders typically do not call for permits for a storage shed.
We do not recommend misleading appraisers, but whenever possible, we do like to point out that making an un-permitted unit a “storage shed” can make life a lot easier for everyone.
When in doubt, try to make un-permitted space “storage.”
Founder/Broker | JVM Lending
(925) 855-4491 | DRE# 01524255, NMLS# 335646