Homeowners who want to renovate their properties or build additions are generally required to obtain permits from their local government, but many skip that step. That can lead to an array of problems when a house is put on the market.
Why Some Homeowners Don’t Get Permits
Sometimes homeowners don’t get permits because they truly are confused about whether the scope of work requires a permit …. but the contractor doing the work should know the answer to that question. Other times, homeowners are often overwhelmed by the cost of a remodeling project and want to save some money by not paying a fee for a permit.
They may also be concerned about potential delays while they wait to have the work inspected or worried about finding that the way work was completed doesn’t meet requirements and having to make expensive changes to pass an inspection. That sounds like a recipe for disaster when not even the homeowner who hired the contractor has confidence in his hire!
Reasons to Think Twice
If you’re considering buying a house that had work done without a permit, the renovations might not have been done correctly, which means you and your family could be at risk.
If someone were injured because of unpermitted and uninspected work, your homeowners insurance might not pay related bills, even if the previous owner was the one who failed to get a permit.
If an appraiser discovers that an addition was built without a permit, the square footage of that area will not be included in the appraised value of the house. Lenders decide how much money to allow mortgage applicants to borrow based on a house’s appraised value.
If you want to buy a house and the seller wants you to pay for the entire square footage, but the appraised value is much lower than the purchase price because part of the house isn’t included, you might not be able to obtain a mortgage for enough money to purchase the house.
Finally, even if the work was done properly the lack of a permit may come back to haunt you when you go to sell your dream home. Your buyer may demand that you get the permits for the work that was not correctly permitted all those years ago. It is better to put the burden on your seller rather than kicking the ball down the field to the future when you will have to deal with the issue yourself!
How to Protect Yourself
A seller is required to provide a buyer with a property disclosure that includes information on all work the seller had done to a property during the period of ownership, including renovations that were done without permits. Even if a seller says the proper permits were obtained, check with your local building department to verify that or ask that the seller provide copies of those permits.
If work was done without a permit and you have not yet signed a purchase agreement, you can insert language in the contract stipulating that the seller must obtain permits and have the work inspected before you close on the house. This may not be easy to do.
I had a listing last year that had an entire addition that had been built by the previous owner without any permits. According to the offices in Prince Georges County that I spoke with, we needed to get a complete set of surveys for the lot and architectural and engineering drawings for the addition as if the property were about to be built rather than being ten or twenty years old. The seller was looking at massive expense and months of delays. In that case we significantly reduced the price and the buyer took on the burden of dealing with the addition going forward. For the buyers, their dream home now had a dream price but I still think it had the possibility of a nightmare future for those buyers.
If you already signed a contract but the inspector uncovers evidence that renovations were done without permits, you might be able to terminate the deal, depending on the type of inspection that you are doing and whether there is a right to terminate.
Buying a house that had work completed without a permit is risky. If you have found your dream home but the seller didn’t secure the necessary permits for renovations, discuss your options with your real estate agent and be prepared to walk away if you’re unable to rectify the situation before closing. You are truly taking on the responsibility for compliance in the future and you don’t know what the regulations might be when you go to sell your home – or what delays and expenses you might be taking on.
It is better to pass on your dream home now than to discover that it has turned into a nightmare later. And…. if your real estate agent tells you it will all be okay, then run from the house and the agent.
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