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Julie2Oregon
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# Posted: 23 Apr 2016 08:48pm
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I'm wondering, because I'm running into this quite a lot. One FSBO cabin I'm looking at is upfront about it. Cash or owner carry with 20 percent down because they added a laundry room to the cabin without a permit so they don't think it will qualify for a conventional mortgage.
I'm thinking this is probably common among small cabin properties. Folks who are DIY-ers and living remote simply do their thing and, frankly, if their "thing" has been done well, then I don't have a problem with it! I'd have a professional look at it to make sure.
What are the pitfalls, though? If say, I needed to sell in the future or my son did after I was gone? Another cash sale in hopes of a buyer?
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Don_P
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# Posted: 23 Apr 2016 10:32pm
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It's easiest not to let their actions become your problem. No problem with people doing their own thing, until they try to become someone else's problem.
Ask at the building office what it would take to clear the slate, it is a case by case problem...how much is hidden that should have been inspected. Then I'd check with your insurance agent.
If they want to keep their actions secret, you're probably not going to be able to keep it secret forever.
One way is to discount the asking price by the value of the improvement and the cost to remove it, as this is what you might be asked to do. If the non permitted laundry causes the flood, there is also possibly no insurance coverage. I'd figure that part out ahead of time.
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Julie2Oregon
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# Posted: 23 Apr 2016 11:50pm
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Don_P
Great points, thanks! Some municipalities are probably easier to work with than others, I'd imagine. I'd like to be on the up-and-up and not have to worry. Two of them don't have wood burners and I'd be adding a wood or pellet stove, which I'd need to have permitted and inspected.
In the case of the cabin with the non-permitted laundry room, the stated and most obvious issue is that the cabin itself is on a concrete foundation and the laundry room is on piers. No idea why they'd do it that way unless they didn't feel comfortable "joining" two slabs themselves, essentially.
The plumbing would be another thing I'd have to check carefully, too, of course, but this cabin actually has city water/sewer and the only fixture in this addition is the washer hookup.
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Don_P
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# Posted: 24 Apr 2016 12:22am
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Something like that might be fairly easy all depending. Piers, although technically there is supposed to be a braced foundation wall under any brace walls of the structure above... well you have a braced structure and the floor diaphragm transfers that lateral bracing out to the piers. In other words the piers are part of a solid structure rather than having the entire building up on stilts. That key difference is lost on many. Anyway, the piers may be ok with the local inspector, you are in seismic country so that is worth checking into. Ours would make you dig to the bottom of the footing to show they are to frost depth. The plumbing wiring and insulation may need to be exposed to show framing and correct rough ins. That is typically what happens here when someone gets busted. This is a bit different but the inspectors do have a job to do and I agree with going into the neighborhood on the up and up... why go in on the wrong foot, you didn't do anything wrong. Let the current owners either clear it up on their own or discount what it will take you to get it cleared up.
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bldginsp
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# Posted: 24 Apr 2016 12:23am
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Quoting: Julie2Oregon if their "thing" has been done well, then I don't have a problem with it! I'd have a professional look at it to make sure.
How can a professional tell how well it was or wasn't done without ripping apart the walls?
The reason they built the laundry room on piers was to save money. It's easy to join new concrete to old.
I agree with Don- the laundry room is a liability, not an asset, and they should reduce the price by the cost of ripping it out. When you get your woodstove installed with a permit, the inspector may, or may not, raise the issue of the unpermitted construction. If he does, you won't be able to get a permit for any work until you resolve the unpermitted construction.
The building dept. will give you all permit records on the property so you can tell what was permitted and what was not.
I've seen a lot of people hurt badly because they bought a house with unpermitted construction, then they tried to get a permit for a remodel, and found out the hard way.
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Julie2Oregon
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# Posted: 24 Apr 2016 01:29am - Edited by: Julie2Oregon
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Thanks, guys! Good advice and food for thought.
The cabin with the laundry room isn't high up on my list at the moment. The cabin itself is really nice, solid, and well-kept. Why they'd make the whole place questionable by adding on that laundry room is beyond me. Talk about short-sighted!
Here are some pics. The backside of the cabin shows most clearly the difference between the main cabin and the add-on. The other two pics are interior shots of the main cabin -- living room and bedroom.
cabinback.jpg
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cabinint1.jpg
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cabinint2.jpg
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Littlecooner
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# Posted: 24 Apr 2016 08:45pm - Edited by: Littlecooner
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I see five opening in the "cabinback" photo under the red board and bat siding. Looks like crawl space vents to me. Why would they be there if this was a concrete pad? The big turn off, run a way fast is the fact that the original cabin is painted red and they painted the unpermitted addition white. Two reason, this shows me they were not good builders and two, they could be University of Alabama fans, that Red and White and being an Auburn Grad, that is a definite no, no in this part of the world. you do not even talk to U of A people. Check out the football association of these people and run away if U of A fans, because it is not a good purchase. War Eagle!! most U of A fans are a little warped in the head, so if really interested, bldinsp needs to come check it out before any money exchanges hands. Best advice on this property ," move on folks, nothing to see here. "
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Julie2Oregon
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# Posted: 24 Apr 2016 09:54pm
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ROFL, I'm not even touching the Alabama football scene.
Actually, these pics are mid-paint and I think the white is a primer. In other pics, the white isn't even finished. You're right about the vents. The listing said concrete foundation and I just assumed that meant slab. I didn't look carefully at the pics prior to here because they were small. They reposted bigger here, which is way cool!
No, this cabin isn't high on my list. It's in a different county and rather far from the area I'd decided on. I'm mostly using it as an example of "what issues do I look for in these 'cash sales' and how do I handle it?"
The cash sale thing isn't isolated. I Googled it, and found the most common explanation on the West Coast is an influx of Chinese people (NOT Chinese-Americans) buying up properties. That burns my biscuits, but that's another issue. I don't think that's the case for the type of property I'm looking at, though.
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Ditchmonkey
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# Posted: 27 Apr 2016 04:02pm
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I financed my place in Oregon and it had a non-permitted bathroom among other things. Depends on whether the appraiser makes note of it and the bank objects. Cash-only sales can be for other reasons too. If the structure is of minimal value and the land is primarily what you are paying for, it might not qualify for a conventional loan.
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Julie2Oregon
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# Posted: 27 Apr 2016 08:58pm
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Ditchmonkey
Good points. The internet is a wonderful thing. I can look up the sales, tax and valuation history on the properties. Most of them, anyway. Very few lack decent recorded history that can be accessed online.
I have a preapproval in hand from a major bank. I haven't gone to my bank yet, which I intend to do. My bank is also a big bank with lots of branches in southern Oregon. I also had my previous mortgage through them and was pleased. They never sold it and service was very good. I did check out their products and rates online to get some of my questions answered. It's been more than 20 years since I went through the process with them last time! Only took 3 weeks, though, from application completion to closing.  The title company said it was one of the easiest closings they'd ever done.
I want this to follow suit, and a big part of that is choosing the right property. With an easy closing, I can't imagine why someone would sit around waiting for a buyer to come along with cash. Which is why I'm trying to imagine why. 
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MtnDon
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# Posted: 27 Apr 2016 09:08pm - Edited by: MtnDon
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Quoting: Julie2Oregon I can't imagine why someone would sit around waiting for a buyer to come along with cash.
Maybe I am simply blind to something, but I can't see how it makes any difference to the seller if the sale nets them a bag of cash or a mortgage that the buyer gets someplace. Assuming the property is financable by the average lender, the seller gets cash (check) from the mortgage company just about the same as if you gave them a sack of cash. Is it that the seller really wants to carry the paper themselves and get a monthly payment from the buyer rather than a lump sum? But then they usually have the expense of an escrow account, or the buyer does.
???
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bldginsp
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# Posted: 27 Apr 2016 09:19pm
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Many people try to buy a house before they are approved for a loan, or after they are approved for a loan, but that doesn't mean the loan will go thru. Many escrows end because the buyer couldn't get the loan. So a seller will prefer someone who "has cash" over someone who SAYS that a bank will lend to them.
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Julie2Oregon
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# Posted: 27 Apr 2016 09:34pm
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MtnDon
That's my question. And if you have a preapproval letter from a bank, which I do, and really simple finances with no other debt (my case), it's straight-forward. Or so I've thought.
It's not as though people are falling all over themselves for basic, 700 sq. ft. remote cabins in this area. So, I'm wondering. (Properties closer to the city are another story. Those are popular, but the owners aren't demanding cash.)
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Littlecooner
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# Posted: 28 Apr 2016 09:35am - Edited by: Littlecooner
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Julie2Oregon
I think you need to discuss what you are intending to purchase with that banker who will handle your loan.
The mortgage industry has made major changes again after the meltdown from '08. Remember that banks do not want to own property, pay real estate taxes and cut grass, that is not the business they are conducting, they are in the business to loan money.
I think the reason that you are seeing a lot of "cash" and or "owner financing" properties being offered in your rustic, small cabin search, it that these people understand that any one fact or combination of fact can prevent a purchases from obtaining a loan.
Such items we here on this forum take for granted as everyday life in a small cabin can be a big red flag to some lender. Things like, no right of way to the property, no source of potable water on the property, no onsite sewage disposal, only composting toilets. No electricity, no fire protection, no police protection. They only want to insure that if you default, the property will quickly sell to some other owner so they have their money. I now see that you are entering an area that appears to have potential problems that parts of the structure or the structure itself was not "permitted" and "inspected" by the local government during construction . It is interesting to me that you can actually obtain a loan to go off grid in the wilds and woolly mountains of the great American west.
If your lender understands the scope of your search and is ok with the purchase, then great that you are pre approved for an off grid residence.
One factor that I believe to be huge in your request and approval for financing is a huge item in my part of the world. I have a very nice home that is build on the old family farm. It is unreal what I have to pay for insurance. Any mortgage holder will require insurance on the building and I have many companies that refuse to even quote insurance because I live more that 5 miles from the closest fire station. And the distance from a fire hydrant is a big factor in your cost of insurance in my part of the world. I do not know the prevailing conditions in south Oregon, but these may be some items to consider in just where you purchase property.
This is my opinion of the cash or owner financing clause, because these owner already know that there are stumbling blocks out there in the mortgage market that can not be overcome on their parcel of land.
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silverwaterlady
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# Posted: 28 Apr 2016 12:36pm
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The reason for a cash sale?
A mortgage cannot be carried because the owner does not have the cabin insured (meaning it is uninsurable,for whatever reason)it is therefore a liability to the mortgage company holding the loan.
Julie,since you are putting most of your assets into your cabin why are you looking at properties that are sure to be a liability to your well being?
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Julie2Oregon
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# Posted: 28 Apr 2016 04:05pm
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I'm not sure that remote=uninsurable. By that measure, the majority of homes in Oregon would be uninsurable because it's a very rural state with few big cities. But that's a good thing to investigate. Thanks, all!
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MtnDon
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# Posted: 28 Apr 2016 05:44pm
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Just because an existing owner may not have insurance on a cabin does not mean it is uninsurable. However, more than likely many mountain / forest properties are not insurable as they sit. I'm not thinking about the type of construction as much as whether or not there is a minimum of 30 feet between the cabin and the trees. The type of siding and roof also enters into the insurability question in many places. The location of a fire department is also a factor. Sure a mortgage lender will insist on insurance and that can be a problem as noted above. But whether or not a buyer can get a mortgage, can get insurance is the buyer's concern, not the seller.
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Bevis
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# Posted: 28 Apr 2016 06:27pm
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Quoting: Littlecooner Auburn Grad
and there is your problem...RTR!
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Julie2Oregon
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# Posted: 29 Apr 2016 03:06am
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Quoting: MtnDon But whether or not a buyer can get a mortgage, can get insurance is the buyer's concern, not the seller.
Exactly, MtnDon. Which is why I'm asking questions and why I don't get why they'll let their property sit on the market, waiting for cash, if that's what they're doing.
As far as looking at properties that may be a threat to my well-being as mentioned above, I'm not looking at anything with the intention of making an offer. I'm seeing what's out there, I'm researching issues, and asking questions. I haven't encountered this issue before, which is why I'm pondering what could be up with the properties and sellers.
A cash sale stipulation doesn't necessarily mean I won't go and see a property when the time comes. But I want to know what sorts of questions to ask and what to investigate. If I like a property after seeing it and decide to pursue it (i.e. see if we can come to terms, arrange an inspection, etc.), then I'm going to be extra cautious.
Buying real estate doesn't excite me. I'm rather leery of people, anyway, and with real estate, yikes. You've got the Realtors who want their biggest cut possible, and the bankers, and the sellers, and there's so much that can trip you up. I'm nothing if not thorough before I invest my time on a property, let alone my money. I don't have a bunch to be throwing around.
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Littlecooner
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# Posted: 29 Apr 2016 08:28am - Edited by: Littlecooner
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Julie2Oregon
You are doing a great job of researching the items you need to consider when you make that trip to look at different properties. If you had the time, which I think you will take, I would not rule out looking at any property just because it is a "cash sale". With your usage of a lender and having a mortgage, one of the first question to ask on any property that is not in the center of town would be how much is the insurance here and what is the insurance company. Real estate is tough if you have no experience. The agent can work for the buyer, work for the seller, or both. So if you are looking at a property, find out if the agent showing the property is an agent for the seller. They only get paid when the property sells, so they are always in the "buy this one, today" mode.
If you find your perfect small cabin that is way out away from town, not many neighbors and have those items we all talk about here, such as composting toilets, rain water collection systems, etc, that to me is a "yellow flag" if it is cash only. This would indicated to me that no insurance company is available to provide the required insurance for the mortgage holder. A trip into town to talk with the local insurance company/agent to discuss that perfect cabin you just visited may be all you need to either quench your fear of no insurance or confirm that insurance will be available and he/she can provide a quote for the insurance. A nice honest real estate agent should be willing to shoot straight and answer questions, as they need a sale to make a living.
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Just
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# Posted: 29 Apr 2016 08:54am
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My advice , take cash, offer 1\3 the asking . Remember YOU will be at the same disadvantage the day you go to sell !!!
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silverwaterlady
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# Posted: 29 Apr 2016 09:05am
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Buyer Beware.
Make sure you have a real estate attorney hired by you to look over all documents before you sign anything and to be there with you at the closing.
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silverwaterlady
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# Posted: 29 Apr 2016 09:15am
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Many of the people on this site do not insure their cabins because they can't or won't because they don't want the extra expense.
Some don't have much invested in their small cabins.
They also have primary homes in another location. So they won't become homeless if something should happen to their cabins.
We always wanted a wood burning fireplace in our log cabin. That was a dream from the very beginning of our planning process.
The dream was not realistic if we wanted to insure our cabin. We had to go with a propane fireplace.
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Julie2Oregon
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# Posted: 29 Apr 2016 11:54am
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The property at the top of my list at the moment is a cash sale but it has electricity, a septic system, a well, electric heat, a fire perimeter, and is 6 miles from one town and 17 miles from another town. It's in a subdivision in which the lots are mostly 2-2.5 acres each. I'd be adding grid-tie solar and the Wiseway pellet stove. (Rainwater catchment, too, I think, for my vegetables and landscaping.)
I can't imagine that insurance would be terribly difficult to get for it unless insurers have a problem with volunteer fire departments. There's a well for water (plus stored rain water) and a river is close by. The cabin will be lived in year-round and maintained, as will the grounds so the fire perimeter will be kept. Part-time or sporadic occupancy and no close water source drive up rates. The roof is composite shingles, not wood. Also, road access is good -- less than a mile of gravel road and then paved road.
None of the properties I'm looking at online is truly off-grid, which is why the cash sale thing has me wondering. They all have wells and septic systems in, full-size and regularly equipped kitchens and bathrooms. Electric heat. All are on-grid for electric except one, and that one has a huge solar installation. (Geez, the owner was using 24 batts, though!)
Just, If, when I fly up there to look at places, I really do like the one at the top of my list and it passes muster, I want to do exactly as you said. Offer them a third down in cash and make arrangements for the rest. Either payments to them directly through terms or the rest of the purchase price via a mortgage/bank. Regardless, I'd need a lawyer and title company to draw it up.
If I were to build from scratch, I'd go simpler. Composting toilet (the C-Head model), a greywater system, strictly solar, and a cistern until I did a well. The building codes are such that it would likely be insurable but probably far more costly than these already-built properties. The fire codes, for instance, require a dedicated, filled water tank and pump in case of fire if you don't have a well plus structural codes, of course. Fire is the biggest threat.
Living in Texas for more than two decades with the crazy weather, I've always made sure that my home is amply covered. When I lived near the coast and had a mortgage, however, it became a nightmare because we were part of the Houston sector and all of the major insurers pulled out due to several, active hurricane and tropical storm seasons in the Gulf. We were all forced into the Texas risk pool for insurance, which offered bare bones coverage at much higher premiums. 
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Ditchmonkey
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# Posted: 29 Apr 2016 01:01pm
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Quoting: MtnDon Maybe I am simply blind to something, but I can't see how it makes any difference to the seller if the sale nets them a bag of cash or a mortgage that the buyer gets someplace
Because a long escrow could tie the property up for months and maybe end up not going through. If the seller knows the property may be tricky to finance, then cash transactions can be preferable.
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Julie2Oregon
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# Posted: 29 Apr 2016 06:46pm
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Quoting: silverwaterlady We always wanted a wood burning fireplace in our log cabin. That was a dream from the very beginning of our planning process. The dream was not realistic if we wanted to insure our cabin. We had to go with a propane fireplace.
Silverwaterlady, I'm just curious. What prevented you from having a fireplace and having your cabin insured? Was it the log structure, lack of a fire department nearby, or something else?
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Julie2Oregon
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# Posted: 29 Apr 2016 06:49pm
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Btw, I'm bringing up these issues and discussing them in detail not only for my own questions but I think they might be helpful to others (lurkers), as well.
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silverwaterlady
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# Posted: 29 Apr 2016 08:23pm - Edited by: silverwaterlady
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Not one insurance company would insure us if we had anything wood burning. I suppose because it's a higher fire hazard and we are far off the main highway. We rely on a volunteer fire department. Three of my relatives have been the Fire Chief. My cousin is currently.
Most people on the island rely on wood burning stoves with baseboard electric heat to bring the house up to code and insurability. My Nephew has never used his baseboard heat because it would cost $500-600 per month.
Every winter on the island at least three full time homes burn down due to fires that started from a wood burning stove.
Our cabin is insured,the policy is four times higher than in the city because we are so remote.
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Don_P
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# Posted: 29 Apr 2016 08:34pm
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Pays to check around though, we have wood heat and have had 2 different insurance companies over the years. I'm a carpenter so its underinsured but there was no question about the heat and the rate seems reasonable.
One other thing to check, came to mind, we just lost another house very nearby, we've all refused to work on it and it'll be burned... meth. The sheriff can probably confirm or deny when you get down to the final few.
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hattie
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# Posted: 29 Apr 2016 08:40pm
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Quoting: silverwaterlady Not one insurance company would insure us if we had anything wood burning.
We are in the same boat. If you have a wood burning stove in our town you won't be getting any insurance. I wanted a small one if the power went out but no way could we do that. We have a volunteer fire department 8 km away, but it didn't make any difference.
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