As Broker's we run into unpermitted dwelling units and unpermitted shops and other structures quite often. Especially in rural areas. We often get asked the questions by Sellers – “Is it ok that we don’t have permits for….? How does this effect the value of my property or will affect the value? Can you get a building permit after the fact? Will I be charged extra for this? What do I need to get a Building permit for?"
Today we want to pull back the curtain and see if we can answer some of these questions.
As a home owner wanting to make improvements to your home, you might have the idea that building permits are a nuisance. While it’s true that building permits can be a pain, they actually serve a very important role that makes the process worthwhile.
Many homeowners that do their own renovations to their home to it themselves to save money, but doing it without getting the proper permits could end up costing you. Doing the work in a way that will meet current regulations, may be more expensive than just winging it but most likely will not be up to building code and could be unsafe without you even knowing.
For homeowners that plan on staying in their homes forever, unpermitted work can seem even more appealing. Unfortunately, whoever winds up buying the house, and then eventually selling it, is going to have to bear the repercussions of the earlier owner’s decisions.
Some owners intentionally don’t pull permits, so their assessed real estate value remains artificially low. For example, let’s say an owner finishes their basement with a home theater, a full kitchen, and a gym. Sounds pretty impressive, doesn’t it?
Doing so, however, is short-term thinking that will have long-term consequences.
A lot of older homes have added additions or out buildings without properly obtaining permits. The good news is that these can be permitted retroactively after the structure has been built. it can be permitted without tearing out that “bathroom” so long as the work was done right.
Once in a while, you may run into larger issues with unpermitted work. As in a whole ADU or addition to the home that was unpermitted. A whole habitable structure requires many different permits including building, electrical and sometimes plumbing permits. But this is still possible to get permitted.
Permitting laws are different depending on the area/county/city that you live in. what might require a permit in one place may not in another. You will need to check with your local municipality – but don’t be afraid to call. We have had this happen before in working with our sellers and have found the city or county officials to be very helpful in resolving the issue.
So why would you even want to bother with it?
1. Unpermitted additions can result in a low appraisal
This can result in an appraisal that is lower than your asking price, which means the buyer won't be able to secure financing for the entire amount less the down payment. That's why most buyers will expect a price discount on a home with unpermitted additions.
2. Sellers are required to disclose any additions or unpermitted work during the selling process. By being upfront about the situation, you can work with buyers to assure them that the work can be fixed. Selling with unpermitted work is possible — even easy — if the changes are minor. But the problem comes if you as a seller do not disclose the fact that there is unpermitted work. You could be liable for the cost to remedy the situation even after you have sold and closed the home if you do not disclose the fact.
3. The insurance policy you rely on to protect you may not do so if something happens in a nonpermitted part of the home. For instance, if someone falls and gets hurt in an unpermitted addition, trying to collect on your insurance policy. Or if you have a fire that destroys an unpermitted building.
4. It does not happen very often, but it is possible that if the lender you used finds out that you knowingly bought a home with an unpermitted addition, it could demand the full repayment of the loan immediately.
5. Another problem that occurs in when a previous owner does unpermitted construction adding rooms, and it makes the septic system too small for the property. This situation is what’s referred to as bedroom count misrepresentation with a septic system. In the reference, you’ll see how easy it is to represent your bedroom count when your septic capacity does not match.
6. Sellers that know their home has unpermitted work are usually aware of the fact that they might need to offer a discount to sell as-is.
When Buyer’s Discover that there is an unpermitted improvement on the home or property they would like to purchase what can they do?
1. If the deal seems reasonable enough, maybe it is worth it for you to get the home and accept the risks involved. You could always plan on correcting the issue later on. As long as you are willing to spend the money, you can usually get permits.
2. Most communities would rather have you point out the fact work was done without permits and get the problem squared away. The town will be able to collect their fees for the permits along with re-assessing the property for increase tax dollars.
3. If the seller is giving a discount to sell as-is, chances are he or she is not interested in fixing the problem. But if you want the home and have issues with the work not being permitted, it can’t hurt to ask.The seller may decide that getting their home under contract is worth their time and effort.
4. If the issues associated with buying the home are too much for you, know that you are not alone. Plenty of buyers are not interested in taking on all that such a purchase entails. Feel free to keep looking. You will eventually find the home you want that has no permitting issues
A little more about Building Permits and Building Codes Building codes are the standards put in place by local governments to ensure buildings are constructed using the best methods for your area. While some building codes are more universal, others vary by your local jurisdiction. Building codes are put in place to keep our communities safe, and building permits are the way that local governments make sure new buildings are constructed according to those standards.
When You Need a Permit While you may not need a building permit in some situations, it’s better to be safe than sorry. Here are some of the most common situations you’d need a building permit for:
· New Construction: Any time a new building goes up, you can bet it needs a building permit. This goes for homes, garages, storage buildings and gazebos. Check with your county or city to find out how many square feet your shed or shop can be before it needs to be permitted.
· Extensive Renovations: Even if you’re not building a new structure from the ground up, you may need a permit to make sure anything new you put in is up to modern building codes.
· Home Additions: Adding a new room to your home, or putting in a new deck, porch or patio? You’ll most likely need to get a permit.
· Changes in Structure: Different from additions or renovations, structural changes usually involve altering the “bones” of your home or other building. This includes things like taking out load-bearing walls.
· Electrical, Plumbing and More: Whenever you’re dealing with systems like plumbing, electrical or other mechanical systems, building permits will be required. Sometimes separate forms will also be required, so check with your local authority