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Steve McLinden, the Bankrate.com Real Estate AdviserNo building permit? Trouble ahead

Dear Real Estate Adviser,
I recently spent significant monies remodeling my house (kitchen, bathrooms, wood flooring, patio, etc.). The contractor said he'd get all the necessary city permits. After completion, I began to suspect he didn't do so because there were no city inspections. I've since attempted to contact him with no success. I did have an independent electrician and plumber inspect the house and they said everything seemed fine. What impact does this have on my ability to eventually sell the house? I don't want to obtain the permits now and have the city take down everything.
-- Jack Dupp

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Dear Jack,
Based on the inspections you had, it sounds as if you had decent-quality work done without the requisite permits, which is far better than shoddy work done sans permits. But, at best, you are still in an uncomfortable position.

For edification sake, most municipalities require permits for any kind of repair, improvement, construction, modification or demolition work on a house. Separate plumbing, electrical and mechanical permits are also required, as a rule.

In your case, the first course of action should be to determine if any permits were actually granted for your address, which you can accomplish by calling your city's building department. It's unlikely that your request will raise any red flags, in part because this information is public record, and people handling these requests are generally in the business of information dissemination, not field enforcement, and they are very busy.

If your "no-permit" suspicions are confirmed, you're not alone. Some municipal building officials estimate that up to half of the minor home remodeling work around town is performed without the mandated permits, often by do-it-yourselfers. Sometimes a city's permit process is so lengthy or red-tape laden that even licensed contractors take shortcuts.

But this is increasingly problematic for homeowners such as you for a number of reasons. In many states, a home seller must divulge repairs or additions to potential buyers and disclose whether they were performed with a permit. If they weren't permitted, the buyers may demand that the seller get the work permitted and inspected by the city before the transaction can be completed, or at least demand a healthy discount for the problem they are inheriting.

Enforcement and fines for non-permitted work varies greatly from area to area, but penalties can be between three and 10 times the cost of the permit. Worse, the city can demand portions of the repair work be undone to make sure underlying components were constructed safely. Another potential problem: Some insurance companies will not pay a claim if a fire originates in, or another problem stems from, an illegally constructed area.

Some homeowners in your situation will hire another contractor to get such existing work permitted, but this can cause city inspectors to suspect something below-board has occurred if they see the work is not freshly done.

Most times, particularly in cases such as yours, where a contractor apparently deceived you, cities will go a little easier on the homeowner while casting a suspicious eye on the contractor if he surfaces in other local jobs -- something I discovered during my days of covering real estate and construction for a large metro newspaper.

Safety -- not just revenue -- is generally the chief concern of most code-enforcement and building departments. For the sake of your peace of mind, you might have to "come clean" here. I am sorry an unethical contractor caused you such concerns.

Good luck.

To ask a question of the Real Estate Adviser, go to the "Ask the Experts page," and select "buying, selling a home" as the topic.

Bankrate.com's corrections policy -- Posted: July 22, 2006
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