real estate

Ask seller for building permit before buying

Steve McLindenq_v2.gifDear Real Estate Adviser,
I am considering buying a house where the kitchen and bathroom have been redone without a permit. Can I try to compel the seller to get these permits? I fear I may lose the house if I do.
-- Sandip

a_v2.gifDear Sandip,
Responsibility for rectifying any unpermitted work should always fall on the seller. And yes, you are well within your rights to ask the buyer to acquire "as-built" permits from the city for the work. Otherwise, the onus is on you after you buy. It would be a shame if you had to undo all that kitchen and bathroom work if it was discovered by the city after you moved in.

If the buyer balks at taking responsibility for the home improvements or won't proffer a healthy discount to you for assuming the risks, I would beat a brave retreat. First, you might try calling the local building department without identifying yourself or the home's address and ask questions about how to best remediate the situation. While you're at it, ask how you go about researching a property to see if it has an outstanding code violation on record.

If the work wasn't done to code, making it right can be quite expensive. But know that even if it was performed correctly, inspection authorities will still charge fees well above their normal range as a penalty to the owner for not following the process in the first place. However, for work that was done properly, the seller's acquisition of an "as-built" permit is often cheaper than granting the buyer a big discount to compensate, offering financial incentive to the seller to obtain the permit himself.

Also, you, as the buyer, could hire a professional engineer to examine the home improvements and their code-worthiness. This would cost at least a couple of hundred bucks, but it would give you peace-of-mind knowledge that the improvements are safe and up to code.

There are a few other issues here. As a buyer, you will only be able to get a loan on the home's known value, which won't take into account the improvements. And because there's no record of the work, the improvements aren't insured. If a fire occurs because of faulty wiring in an unpermitted addition, you can imagine the legal mess that could make.

For perspective sake, many houses 50 years old or older have had some unpermitted work done in their lifetimes -- walls moved, rooms added in the basement or some other home improvement. Reasons for this vary. For example, the conversion of a standard two-car garage into living quarters, in most places, requires a separate exit and other safety measures that can easily double the cost. For the longest time in California, the only way a county could increase tax on a property was when improvements were made, so many residents there hid improvements.

I suggest you call the local building department without identifying yourself or the house's address and ask questions about how to remediate the situation. While you're at it, ask how you go about researching a property to see if it has an outstanding code violation on record. If the work wasn't done to proper code in the first place, making it right can be expensive. Even if it was done to code, authorities may still charge penalties well above their normal fees as a penalty to the owner for not following the process in the first place.

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. Read more Real Estate Adviser columns and more stories about mortgages.

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