I am looking to buy a house with unpermitted additions

I am looking at a home to buy which has a large addition that was built without permits.  The Realtor said the addition was definitely built to code and should not be an issue for us should we buy the home.  We asked if the seller is willing to obtain the permits as a condition of a sale.  The listing agent said the seller will not. 

What type of problems could I run into with this home?

DM

Response

Dear DM,

The listing Realtor should know the home and had several conversations about the home with the seller(s), however the agent is just an agent.  The addition might be built very well, nobody knows and even getting it inspected and permitted by the local building department can give you the assurance that the work is good. 

I will tell you this, the first portion of the Building Code states what types of construction requires a building permit.  The list includes all, electrical, plumbing, insulation, framing, roofing, drywall, HVAC systems, etc., all the components of a home or addition.  So if there is no building permit, the addition is not built to code, and any effort to obtain a permit will include proving it was built to code.  Even the areas covered by the interior finish, roofing, soils, etc…  Plus, the building code states permit fees for non-permitted work are to be doubled.  Most building permits trigger additional fees and permit costs, such as DIF (Development Impact Fees) and School Fees.  School Fees in California can vary; I have paid as much as $5.25 per square foot for a project.  That would be $3,150.00.  The total costs of inspections, fees, permits, etc could be many thousands of dollars.

As for the real estate transaction, some Cities require an occupancy inspection triggered by a sale.  It is possible that the City could require the addition to be inspected, bought up to code and permitted or removed before a C of O is issued.  The City should allow a specific time allotment before taking action, should the addition not be legalized.   That time allotment would probably come to an end after the sale, when you become the responsible party.  It is most likely that the REALTOR marketed the home knowing whether the home would be subject to a City inspection.  I suggest you check with the local building department.

Another problem could be the appraisal.  The appraiser will measure the home, check the County Assessor’s records and verify they match.  The lender will only lend on permitted/approved area, so the appraisal could be short of the market price, assuming the seller is seeking to be compensated for the addition too.

There are risks in purchasing such a property.  I know people who felt the home was still worth the risks, you must keep in mind that at some point, someone will be made to legalize the addition — and pay the costs associated with doing so.

Thanks and good luck,

Curt V. Schultz, Architect, General Contractor and REALTOR®