Buying a home with unpermitted renovations

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Submitted by imjustsaying on September 4, 2012 - 5:32pm

We are considering buying a beautiful home that has everything we want. One problem is there were major renovations were not permitted. The seller has given us written guarantee that everything is up to code. What are our risks as far as taxes are concerned when we do eventually get all the permits up to date? We have explored most of the obvious but I am wondering if there is anything we may have missed or are unaware of.
thank you

Submitted by SD Realtor on September 4, 2012 - 6:51pm.

It is really a tough call. How would you deal with things if the gaurantee the seller made needs to be backed up? Suppose you have an inspector over and things are up to code but who undertakes the cost of making things visible for the inspector to make the inspection and then patch things up again?

My point here is that the gaurantee is fairly worthless within the real estate transaction. If you want to have an attorney draw up a much more formal agreement that is outside of the transaction between the two parties then that is another story. However having a written 1 or 2 page document from a seller seems to not be very well thought out to me.

Also if you do intend to gather permits for all of the work, and the renovations were "major" per your original post, it is in your best interest to know EXACTLY what you need to do to get the work permitted. Do you have a list of what you need to do and what costs are associated with doing it?

As far as taxes are concerned if the square footage of the home as it is now does not match the current assessment then when you get all the permitting done, the home will be reassessed at the updated square footage and you will pay the correct property tax.

Here is my point, have a clear plan. If you are going to move forward with purchasing the home and then getting all of the permits for the previous work done, then you better darn well do your homework and understand what the potential costs are. In the best case all of the work was done correctly and you obtain permits. This process will cost money. In the worst case, the work was not done correctly and you will need to remedy the problems. This will cost alot more money. Honestly to me the "gaurantee" you have is worthless. Get an attorney to draw something up and I may change my mind.

Here is the alternative. You love the home and it all works from you then maybe you buy it and live with it as is. If in the future you do decide to undertake the permitting process then so be it. However before you do that, know what it takes and what it costs. In the meantime, enjoy the home, get a thorough inspection, perhaps get all of the plans and documentation they have for the work they did and have a contractor or engineer look at them. Don't rely on a physical inspector to be able to give you an assessment of the work being up to code or not.

Submitted by imjustsaying on September 5, 2012 - 9:33am.

Thank you for your response. We have had the property inspected and appraised and had a contractor come out. Nothing came up that was not usual repairs for any house this age. The home appraised for a few thousand over our offer so we decided to go forward. It's a very nice home , we anticipate it being our last :)

Submitted by thejq on September 5, 2012 - 3:15pm.

If it's not permitted, can you get a loan? What about insurance? What do you tell the insurance co about the sq footage of the place? What if, god forbidden, something happens, say a fire or flood, could you be denied coverage because of the addition? My understanding is that, it's only officially code complaint after a city inspector's approval.

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