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What Buyers and Sellers Need to Know About Un-permitted Work

Un-permitted work on a home can prove to be damaging to a home sale. It can be both timely and costly.   So, for those looking to buy or sell a home, be sure to stay updated on the critical aspects of permits and understand what to do if there is un-permitted work on a home.

 

What Home Projects Need A Permit?

 The first question I often get is What projects actually need permits? Overall, any modification or renovation on a home that alters the house’s footprint requires a permit. This includes:

  • Renovations to the existing home.
  • Room additions.
  • Deck additions.
  • Roof replacements.
  • Fence modifications or additions, specifically if they are above the permitted height restriction.
  • Adding windows, doors, and skylights.
  • Plumbing and electrical work, both modifications and additions.
  • Siding projects.
  • Replacing your water heater or changing your ventilation system.
  • And more.

To learn exactly what needs a permit, you will need to contact your local municipality.

  

How to know if a home has un-permitted work?

 The Homeowner…

Hiring an inspector will be the most efficient way to learn if work on a home has been done illegally. If you are the homeowner and are uncertain if there is any un-permitted work on the house, you can hire an inspector before the sale. However, if you have owned the home since it was built, and have followed all protocol during your additions and renovations, then you should be good to go.

  

The Homebuyer…

During a home sale, the seller will be required to fill out a Transfer Disclosure Statement (TDS) – It is required by California law, Section 1102 of the California Civil Code. This document, which is one of the many disclosures that a seller must complete, will inform the buyer if any material facts may affect the property’s value or purchaser’s desirability. This form is complete to the best of the seller’s knowledge. The TDS includes questions directly related to the seller’s knowledge of structural modifications, room additions, and other alterations or repairs. It specifically asks the seller if they are aware of any work completed without necessary permits or work not compliant with building codes. An honest response by the seller will be the first indication for the buyer whether or not there is un-permitted work.

Additionally, buyers should check with their local municipality regarding permits for the property. Permits are public record, so doing a simple search can provide insight into the previous projects on the property and inform buyers if sellers are disclosing all facts honestly.

Lastly, to ensure nothing is missed, buyers also want to hire an inspector during the due diligence process. Though this is not fool proof, a good inspector can often give indications of work that appears to be not to code, a sure sign of un-permitted work.

 

How Un-permitted Work Impacts the Value of a Home

Most homeowners taking their house to market with un-permitted work will need to sell their home below market value. This is because buyers view the un-permitted jobs as work they must complete. Homeowners can anticipate that offers will be reduced, considering both the time it will take to obtain permits and the associated costs.

For buyers who are financing the home, they can expect their lender to appraise the house at a lower value if the un-permitted work is readily obvious to an appraiser. This limits the seller’s ability to request a higher price since most buyers in today’s market finance their purchase. How much they will reduce the offer will vary depending on the projects at hand.

  

What to do if work is un-permitted?

 Whether you are the buyer or seller, you will want to know how to obtain permits for un-permitted work. As a seller, you may want to complete this phase before taking the home to market to ensure that you get the highest price for your home; as the buyer, you may want to consider purchasing a home below market value if you can obtain the permits yourself. In the end, it is all up to the individual.

If work is un-permitted, you can pursue a retroactive permit. This will involve an inspector coming out and assessing the work to determine the next steps. In some cases, a permit will be provided at a fee. However, not everyone is this lucky. In other cases, the inspector will require modifications and then the payment for the permit, while in the most unfortunate cases, inspectors will require a complete teardown.

 

It’s Better to Be Safe than Sorry

If you are a homeowner with un-permitted work in their home or a buyer interested in a home that has an illegal job done, always remember – It is better to be safe than sorry. Get the inspector out and determine a plan of action. Not only will this improve the chances of a home sale, but it can also save all parties money in the end!

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