Is it a Good Idea to Buy a Home that has been Remodeled without Permits?
If you’re looking at a home that you love and want to buy it, should the fact that it contains areas remodeled without permits dissuade you? The answer is, it depends. If you decide to buy, you need to be alert, and make sure that it’s the right decision. Issues, when it comes to real estate, can be very expensive to remedy.
It isn’t uncommon for homes to be remodeled without permits
Consider a situation where finding a house in a neighborhood that you like. You find out that it’s been remodeled without permits. Perhaps the homeowners only added a small sun room at the back and built kitchen cabinets and counters without obtaining permission. Maybe they installed solar panels. If you were to buy this house, would you get into trouble?
You should first talk to your real estate agent to learn about what they think. The top Realtors are very familiar with the repercussions of not having permits and what level of construction requires a permit in your area. Rules to do with permits vary from one city to another. Your agents should know what kinds of remodels are likely to get you into trouble in the city in question.
Why homeowners skip getting permits
Anecdotal evidence suggests that most homeowners do not get permits for the remodels that they do. For this reason, it may hard for you to find a home to buy in which all work done is covered by permits. There are a number of reasons why homeowners fail to get permits.
Permits can be expensive: The cost of a remodeling permit is based on the cost of the project. A permit for a $5,000 remodel may run to $100. Many homeowners find the cost excessive and wish to save on the expense.
Permits are an invitation for arbitrary demands: Home inspections often appear to be more art than science. Homeowners know that different home inspectors rarely agree on what kind of work is required. An inspector who shows up at the beginning of a project may tell a homeowner to dig a trench 20 inches deep for electrical wiring. The inspector who comes in to look at the work completed may tell the homeowner that they got it all wrong, and the trench needs to be 30 inches deep. They might order expensive additional work for the mistake that’s been made, even if it isn’t the homeowner’s fault.
Permits take time: Often, the city is severely backlogged on inspection work. When an inspection is required in the middle of a job, it can cause delays to the project and raise costs if an inspector can’t make it for weeks.
What can go wrong if you buy a home that’s been remodeled without permits?
A few things can go wrong if you decide to buy a home that has been remodeled without permits.
Work may be done incorrectly: It isn’t unheard of for contractors to be careless. You may find that work done without permits isn’t up to current building codes. Many of the better local contractors will require that a permit is pulled if the job is large enough.
Your homeowner’s insurance may not cover you adequately: You will need to get homeowner’s insurance once you buy a home. Should you to make a claim on your homeowners policy at some point, inspectors sent by the insurance company may find that your home has had work done without permits. They may then turn down your claim.
You may have to do work without permits, too: If you buy a home that has been remodeled without permits, you’ll find it hard to get a permit yourself when you need to remodel down the road. The inspector who comes to look at your home will find that it’s already been remodeled without permits, and require that you make major changes in order to get up to code. You might be saddled with thousands in unnecessary expenses.
You may not get a fair price for the home when you sell: If additional square footage has been added in an unauthorized remodel, you may pay full price for the home; when it comes time to sell the house yourself, however, you may find that the appraiser won’t include the unauthorized square footage in the appraisal. You may find it hard to get the home buyers to pay full price for all the square footage of your home then. You might be refused a refinance, and buyers may be turned down for home loans.
Obtaining a permit after the fact
It can be a hassle owning a home remodeled without permits. Since most homeowners do perform such remodels, however, you may not find a home that is fully authorized. You could buy, and then get an as-built permit from the City. You would need to hire an architect, draw up new blueprints, and spend much as $10,000.
Ideally, you should try to find a home to buy in which all work done is properly authorized. If such a home is hard to find, you may need to talk to the sellers, and have them obtain the as-built permits necessary, or at least knock a few thousand dollars off the price.