Should I back out of this? Need advice fast.

In in my inspection period for an REO right now. It would become a rental.

I found out the extra room in the house is actually a garage to room conversion. It may sound dumb, but I initially thought it was just an extra room that the county had overlooked, since most of the other houses and the person who converted the garage did a pretty convincing job. But the inspector pointed out some signs that it was converted. It might not be easy or cheap to convert back because they build cinderblocks around the front that look exactly like the rest of the house, and the garage door apparatus is completely removed.

When he went into the attic he found that they had also done all the wiring for the room themselves. It was done incorrectly–aluminum spliced to copper, and other problems with grounding, etc.

At this point I was planning to have an electrician come out and do an estimate on how much it would cost to undo all the electrical “work” and then go back to the bank again to see if they will come down more on the price.

But I am concerned that there could be a problem with the insurance co. because the room was never permitted in the first place. I don’t know if the county would allow the room to be approved or require it to be turned back into a garage. Would the insurance company refuse to pay out if something happened in the house, because of the garage conversion wasn’t permitted?

Unfortunately I have already invested about $600 of my own money for various types of inspections (mold, termite & main inspection), which would be down the toilet if I back out now.

What would you do? I know that a lot of people like having these bonus rooms, but is it worth the risk in a rental property? I have two days left in my inspection period.

You can back out or ask for a lower price. Whatever you do, don’t purchase unless the space is brought up to code. You now know it is a hazard and that makes you liable if that hazard causes in injury. An insurance company in my area refused to cover a fire because the fire was caused by non-code electrical in an illegal apartment. I know a LL who was convicted of manslaughter because a tenant died in a fire in an illegal apartment. I don’t think it’s worth the risk.

Thanks. I will not buy the place unless the bank would pay for the electrical.

What I’m more concerned about is whether the insurance company would have a problem with the fact that the garage was enclosed and turned into a room, without permits.

How strict is code compliance in your area?

Where I live, whole illegal units are fine as long as they are not fire-traps. I bought a SFR with a guest house that was actually 5 units. No one would worry at all about a garage conversion that looks like part of the house. But that is this (mind-your-own-business) area.

Why not get the electrician over there for a bid to correct the faulty wiring? If you are going to hold the house as a long-term rental the extra room is an asset, no?

What are the negatives? Would it be difficult or impossible to sell or finance the house due to the conversion? Your decision has to be based on what makes sense in YOUR town.


^ I don’t know if it’s that strict here or not. If you call the county on the phone they will tell you that it must be converted back, you must pay to get an architectural drawing, etc. But there are a lot of these conversions around here, nonetheless. The problem is the electrical county/permit person will have to come out to approve the new electrical work and they will see the unpermitted room. I don’t know if the electrical inspector shares information with the building inspector. If the county makes me convert it back to a garage it will destroy the rent potential of the house and be expensive to convert back as well. Also there is the insurance concern I mentioned above. Maybe I’m overblowing things but it seems like taking two big risks without having enough information.

Just call your insurance agent and ask the hypothetical question about the unpermitted converted room. I just don’t think it is that big of a deal. You can also call the county inspector and ask him general questions about county code on those type of units.

This problem could get you a much better deal from the seller. Other buyers could have your same concerns.


I would go back to the seller and tell them that I would only continue with the deal if they have the conversion properly permitted and inspected and the wiring brought up to code.

If they dropped the price enough, I could do the work myself, but why bother? It’s not like there isn’t anything else out there to purchase.

Locally, I might be able to get that conversion inspected retroactively. Or maybe not. It would have to comply with building codes and property line setbacks. Walls on garages are sometimes 2X4 construction, and houses must be 2X6 minimum framing, which means that a conversion might not be able to come up to code.

You can forget about re-selling this property until it is brought up to code. You know, so now you must disclose.

I have rentals in a city with strict inspections for rental units (every time a new tenant had the water put in their name).

I had walked away from some houses with garage conversions thinking the rental inspection would show the conversion wasn’t permitted,then on my last inspection I ask the inspector, he said if the conversion was done before I bought the house he didn’t care, as long as it was safe.

At the same time he told me if I had a water heater replaced without a permit (while I own the house), he would catch that and it would cause problems.


It is interesting that really you must conform to the norm in YOUR area. Here things are pretty darn loose because it is a poor town and people can’t afford even necessary renovations a lot of the time.

Here it is possible to see what an asphalt shingle roof looks like after 40+ years-- because the owners didn’t replace it. (Bad, curling up on the edges of the shingles, and some totally bare).

But if you live in an expensive, highly regulated area…you have to conform and have more rules.

I like my poor 'lil town that has inexpensive properties and yet relatively high rents. Where there is a shortage of good rentals.

There is money to be made everywhere; learn your town.