Don't get stuck with $20K bill when it's time to sell
It's a good idea to check the building permit record on a home you're planning to buy before you remove your inspection contingency. Although buyers are advised to take this important step, many don't. This can result in unpleasant consequences.
Some planning departments won't allow you to take out a permit to do additional work on your home if there are outstanding or expired permits that never received final approval from a city building inspector.
The buyer of a home in the hills above Oakland, Calif., had to clean up a lot of the previous owner's poorly done work before she could begin the work she wanted to have done on the home.
In one instance, buyers received a copy of the permit record on the home they were purchasing before they removed their inspection contingency. It was loaded with expired permits for work that had been completed but had never received final approval from the building inspector.
The buyers were concerned that they might incur unquantifiable charges if the permits weren't approved before closing, so they asked the seller to resolve this issue as a condition of the purchase.
The seller of a Piedmont, Calif., home recently found herself in a similar situation. She bought her home long before unpermitted work was an issue. The buyers discovered during their inspections that the previous seller had done a lot of work incorrectly and without permits. To close the transaction, the seller had to agree to pay more than $20,000 to correct the problems.
HOUSE HUNTING TIP: Not only is it a good idea for buyers to check the permit history on a home before they buy, but sellers are wise to check the permit history on their homes before putting them on the market. This way, they can correct any permit issues before the listing goes public.
Homeowners often assume when they hire a contractor to do work that requires permits that the contractor will take responsibility for this. This may not happen, particularly if it is not specified in the work authorization contract.
Sometimes there is miscommunication between a contractor and the homeowner. One thinks the other is going to call for a final inspection and meet the inspector, but neither does. It's a good idea to follow up on this because it will cost more renewing a permit if it expires before the final inspection is done.
Another issue that can create problems is work done without building permits that adds living space to a home. In most cases, due to changes in mortgage lender requirements, appraisers can't count unpermitted work as livable square feet, even though it is used as such by the current homeowners.
In older neighborhoods, there are often homes where an attic or basement has been converted to add living space. Until recently, if the work was done professionally by a contractor, the appraiser could usually count it as usable square feet. Today, underwriters may require copies of permits for all work that adds square footage in addition to what shows in the public record.
The public record on a property is not always accurate. For example, an addition that was done with permits may not show up in the public record. In this case, the error should be corrected before the home goes on the market. Your real estate agent or assessor's office should be able to help you with this.
Many homes have been renovated without the benefit of building permits and final inspections. In today's real estate market, this could have an effect on value.
Even so, the last thing a seller should do is make representations that can't be substantiated. Sellers who had work done without a permit should let the buyer know, in writing.
THE CLOSING: Sellers have been sued for misrepresenting square footage; it's wise to err on the side of caution.