Selling your house can be an exhausting and emotionally draining experience. Between hiring an agent, staging the home, finding a new home, and everything else on your plate, it’s easy to overlook a small but important detail. Does your house have unpermitted work?
Many homeowners have unpermitted work done on their home because it’s just human nature to think, “It’s my home, I can do what I want with it.” But if you don’t get the proper permits, you risk raising red flags in home inspections, which could subject you to lawsuits or losing thousands on an offer. Some homeowners just don’t know that they were supposed to get a permit for certain work or that a previous owner had unpermitted work done.
While it’s common for homes to have unpermitted work, there are some things you should know if you’re trying to sell your house. Failing to disclose such work or rectify it could result in serious legal and financial consequences. Here, we’ll explain what unpermitted work is, how to find out if your house has unpermitted work, and discuss what you can do to protect yourself from liability.
Broadly speaking, unpermitted work is construction on a home that has not received the proper permits according to local ordinances.
Most home improvement projects in the United States require a permit. Small projects like painting, floor installation, and minor electrical repairs won’t require a permit, but almost anything else will. Adding a fence, or adding a basement or entire wing to your house, requires permitting.
It might sound like pointless bureaucracy at work, but permits serve as safeguards for homeowners by ensuring that work complies with local policies for land use, zoning, and construction. They’re meant to ensure work gets done correctly and safely.
Many homeowners forgo permitting because it sounds like a pain. And, depending on what you’re doing and where you live, it surely may be. Still, a home with unpermitted work is a lingering liability, especially when you’re getting ready to sell.
Any buyer takes over responsibility for work with no permits, and most states legally require a seller to disclose any unpermitted work before closing. Some buyers won’t feel comfortable with unpermitted work and lower their offer. If they find you tried to hide something, they may take their offer off the table entirely.
It isn’t common, but sometimes inspectors will force homeowners to retroactively go through the permit process for finished projects. That might mean hiring an architect, making changes to meet codes, and other costly fixes. Some towns may force you to rip out the project without any financial restitution. A difference in square footage could impact the amount of tax you have to pay on the property so, depending on the municipal government, you may find yourself on the wrong side of an angry local body that feels cheated out of tax revenue.
Moreover, mortgage companies and insurance companies can come down on you for unpermitted work. Your insurance policy covers only permitted parts of the home so if somebody falls and gets hurt in an unpermitted addition, they could pursue legal action against you, not your insurance company. As for mortgage companies, they can require an immediate loan repayment if you knowingly buy a home with an unpermitted addition. That’s more of a caution for buyers, but as a seller, it’s never good to put your buyer in a compromised position with their lender.
So, why do so many houses have unpermitted work? There are a number of reasons.
Construction permits are not cheap. As such, many homeowners enlist an “under the table” contractor who will charge less by bypassing the permitting process. Yes, it’s cheaper upfront, but you may pay for it in the long run.
Additionally, sometimes contractors lie. They’ll charge you for the permitting process but then never go and get the permits. That exposes you to lawsuits and you’ll have to hire another contractor to redo the work and get the right permits.
That’s why it’s a good idea to check if you have had any unpermitted work done in the past before selling. You really might not know.
Cities and towns change laws all the time and communication to the masses is, well, lacking. Local home permitting laws change frequently so keeping up with them can feel impossible. Good contractors tend to be up-to-date on local building codes but to be on the safe side, you should still ask to see any local building codes to make sure you’ve gotten the right permits.
As we’ve mentioned, many homeowners skip the permitting process entirely. A lot of the time, they get away with it. Whether intentionally or unintentionally, previous owners fail to report unpermitted work to buyers all the time.
If you’d like to find out if any work was unpermitted, you can reach out to them or their agent to ask. If they can’t or won’t provide you with permitting information or information about the contractor who did the work, call the local building code enforcement office and ask for the permit history on the house.
If you’re unsure if your house has unpermitted work, there are ways to find out. If you can, find the blueprints for your home and check them against the current construction to see if anything doesn’t match.
If you can’t find blueprints, ask the previous owner or search city records. You can search for permits through the city’s building department. Many towns and cities offer online searches, otherwise you’ll need to call or set up an appointment to verify permits.
If you know your house has unpermitted work, you have two options: Sell as-is or get the permits.
If you sell as-is, knowing you have unpermitted work, you must disclose the unpermitted work to any potential buyer. It will likely require you to offer a price cut on the home’s value to entice buyers to take on the risks of unpermitted work. Most homeowners won’t want to buy a house with unpermitted work because of all the risks we’ve laid out. Still, selling as-is and failing to disclose unpermitted work puts you at serious risk of a lawsuit.
You might think, “I can sell the house and they’ll never find out there’s unpermitted work.” You might be right, but the potential costs in legal fees and redoing the work if you lose a lawsuit far outweigh the benefits.
If you plan to sell as-is, hire a few contractors to give you quotes on how much it would cost to redo the unpermitted work with the proper permits. That way, you’ll have a clear idea of what the real cost to the buyer would be should they go through permitting themselves. If the work was done up to code, it might only be a few hundred dollars, so the buyer has no ground to stand on if they try to drop their offer by $10,000.
Selling as-is may cost you profit, but getting the permits means money out of pocket. Before you make any decisions, call your local building permit office and ask if you can pull the permits yourself. Depending on how large the renovations were, you might be able to soar through the process quickly and inexpensively. Just apply for the permit and local building authorities will send out an inspector to check the work and approve the permit.
If the inspector identifies major issues, however, you may have to hire professionals to fix the work on top of the permit cost. Before pulling permits, hire a contractor (although probably not the one you hired to do unpermitted work) to examine the work and verify it’s up to code.
If you want to secure the highest offer possible, you should get permits before selling. If those upfront costs are too much, it’s time to go to the negotiation table and sell for the best offer you can get as-is.
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