"Buyer to verify permits" what does it mean?

vangndy · 07-20-2010, 01:29 PM

A little help Pelican Brain Trust. I'm not quite in the market yet but should be soon so I've started looking around at real estate listings. Many of the listings with this phrase are additions or remodels but what does it really mean? Could it be that there are no permits with the city for the additions? As a buyer what are the ramifications for buying a home with unpermitted additions? Would it be simply a matter of getting inspected and filing for the permits? Or are these the sorts of things that are supposed to be removed? Like I said I'm not quite in the market yet but I have started poking around so give it to me straight here.

Hugh R · 07-20-2010, 01:32 PM

Apprasiers usually have to disregard the value of unpermitted remodels. IIRC, you can have problems with insurance coverage with unpermitted work. For example you add a bonus room and have an electrical fire in that room, no permit, perhaps no insurance coverage.

Rusty Heap · Rusty Heap's Garage

Any property or dwelling will have a tax number or property number. take that number down to your city hall planning department, and they should have records of any "legal" history of as built conditions.

depends on how old the house may be too, as in a septic field or garage/shop addition may not have been filed back in the 50's-60's-70's or older, the construction may or may not have been permitted, but just not filed.

stomachmonkey · 07-20-2010, 02:29 PM

Some banks will not lend money without all Permits, also called CO, Certificate of Occupancy, in place.

This can be a huge, expensive, aggravating thing to deal with.

Bought my first house from a builder who was building it for himself. At some point they needed to move and we came along and bought the house.

Fast forward 12 years and I go to sell. My attorney tells me to pull the CO's and make sure everything is in place. Coincidently, my personal attorney, Jerry, had represented the bank when I bought the house.

So I says "why, you represented the bank back then, you would never have let a missing CO slip". She says, "that lender did not care about CO's so we did not ask for them. A potential buyers bank may require them so go get them".

Well it turns out the builder had drawn up plans and had permitted a 2 story structure with living space on the ground floor and the entire 2nd floor was listed as "Attic". After he got the final sign off he went back in and put in bedrooms and bathrooms upstairs. He was trying to save on the tax bill I assume.

So now I had to get this thing permitted but it's 12 years down the road and code has changed. Fire, electrical, plumbing had to be inspected and brought up to current code.

For a while it looked like I was going to have to tear down a detached garage that had been part of the property before the new house was built. The builder had extended the garage from the original footprint and the property setbacks had been amended. If the garage envelope had been outside the setback the whole thing would have had to come down.

I lost the 1st buyer over it. The second buyer took the house but I had to cure all the deficiencies and put $10k in escrow on top of it. Took a year to get sorted out and cost me many sleepless nights as well as a nice chunk of change.

Zeke · 07-20-2010, 03:11 PM

Make your offer on a house you want contingent on an inspection by a certified home inspector. Beware, certifications in CA are not mandatory by the state. Only their own associations issue these certs. As part of the process, have the inspector review the permits on file and compare them to existing work.

If the work is exposed and the inspector says it's to code, you might go for that. Again, the inspector is key here, not all understand all codes. Exposed work is easy to permit retroactive. The worst I've heard of is double the original fee and that gets waived often enough.

You might want to consult with a contractor (again, do your due diligence selecting) before the deal is signed. It may take a contractor to explain the "improvements" to the building inspector. Seriously. Someone has to file for the permit anyway before the inspector will come out.

If the work in question is concealed, the process becomes a lot more intensive. You may have to dig down along side a footing or pull off some drywall.

Avoid using referrals for inspectors or contractors within the industry. Not from the Realtor nor from the home inspector. In most cases this is a conflict of interest anyway. Find your own on Yelp or something.

Keep this process in front of you during the negotiations for the property. If you are qualified for financing, you are golden and can drive the deal.

If you think you have competition from other buyers, send all info you have to the seller and seller's agent by certified mail. They will have to disclose anything you know that looks like it needs to be disclosed to all other buyers.

Like no permits.

Porsche-O-Phile · Porsche-O-Phile's Garage

If it has unpermitted work, avoid it, no matter how good a deal it sounds like.

Trust me, this is a road you don't want to go down.

Zeke · 07-20-2010, 03:59 PM

Quote:

Originally Posted by Porsche-O-Phile

If it has unpermitted work, avoid it, no matter how good a deal it sounds like.

Trust me, this is a road you don't want to go down.

Well, that's kind of a blanket statement. The typical listing will say things like "buyer to verify permits." There could be an unpermitted above ground spa in the back yard that is listed on the property description.

So what? Yank it out or get a permit. Maybe the permit will require different fencing or gates. It could be a nightmare or a POC.

(Most I've seen should be yanked anyway.)

If one is looking at a room addition that is questionable, I agree with you 110%.

notfarnow · 07-20-2010, 04:10 PM

Quote:

Originally Posted by Porsche-O-Phile

If it has unpermitted work, avoid it, no matter how good a deal it sounds like.

Trust me, this is a road you don't want to go down.

wow, things must be TIGHT in your neck of the woods

I'm at the office right now, and just looked up my last 10 listings. 7/10 had work/renovations w/o a permit. It *surprises* me when a homeowner tells me that they got the proper permits for work.

That has to be disclosed, but most buyers don't even think twice... unless there are some obvious issues that raise red flags.

Milt is right about inspectors. Ask around for good referrals. It's a funny business, that one. I have seen some whacky stuff in my brief time in real estate.

Also check into title insurance. Not sure how it works down there, but up here in Canuckistan, some title insurance will cover you if you have unforseen issues that were caused by work that was done without permits or not up to code. If I had the right title insurance when I bought our house 6 years ago, it would have saved me $28k this summer.

Zeke · 07-20-2010, 04:37 PM

Our title insurance will cover if there is a lien that pops up that was on file but not discovered until after closing. Improvements paid for, permitted or not, won't result in a lien....

UNLESSS, the jurisdiction in which the property is located has put a "lis pendens" on the property. If that were the case, it would probably not escape notice by the title company.

I don't mean to be confusing, just citing that there are more than one type of lien.

stomachmonkey · 07-20-2010, 05:45 PM

Sometimes pulling permits for work that was permitted can be beneficial.

Wife and I were looking for our first house. Found an immaculate cape that she fell in love with. During the inspection the inspector noticed lack of access to the attic which was curious. Owner said his wife hated the way it looked so they rocked over it. He pointed out where in the closet it was and said it can be cut back out. MMM, ok, not digin that but let's proceed.

We do the outside walk around and the inspector points out the fill neck for the in ground heating oil tank which is behind the garage in the back right corner of the house. Suggests getting it decommissioned before purchase. May be a bit of a pain as it's obvious that the garage has been extended and the extra concrete floor was likely poured over the tank.

Next is basement, checking out furnace which is in the front left corner of house, exact opposite of tank. Hmmm, that's really odd. So we follow the supply line and it exits the foundation right by the furnace. Hmmm, no one runs lines outside around the whole perimeter so we go back outside and find another tank fill in the yard in the front left. Hmmm, so what's that tank behind the garage for???? Owner claims no knowledge.

I go to town hall and find permit for previous owner to extend garage and it indicates an in ground tank. Call an oil company to get estimates on decommissioning tanks. While waiting for them to show up I see a neighbor and ask about previous owner. Am told he was a wrench who did side work at the house on the weekends. Oil co shows up and we pop the cap and holy crap, it was obvious where the guy was disposing of fluids, oil, gas, brake, tranny, antifreeze, everything was in there. Dip tank and it seems pretty full.

Now the in ground tanks are a big deal on Long Island. LI gets it's drinking water from aquifers. Pretty much the entire island sits on top a series of giant aquifers so soil contamination is a pretty major deal. At the time you could still get in ground tanks decommissioned for around $700 per tank and no EPA inspection. They come and pump it, fill it with sand and done. One thing about in ground tanks, it's not a matter of if they will collapse, but when. The cleanup cost can get get in to the $100's of thousands and if your home owners does not cover it all you are on the hook. If the thing is already compromised when you buy it you are on the hook so unless current owner deals with it the advice is to walk. Basically anyones name that has ever been on the deed is on the hook for the cost.

So I tell current owner he needs to decommission or no deal. He says no. I ask him if saving $1,500 is worth the risk of the next owner not dealing with it and the potential to be partially on the hook for cleanup in the future? "Let them come after me" So I walk on the deal.

Week or so later the wife calls, she is with a RE agent in the area and took her by the house to show her what we liked. She's behind the garage and is asking me where the fill pipe is. "6 inches off the garage wall dead center left to right in the flowerbed" She does not see it. "It was sticking out of the ground a good 4-5 inches, you can't miss it" Nope, not there. So I tell her to dig a bit and sure enough she finds it. Current owner cut it below ground level and covered it.

Fast forward a couple of months and we are driving down that street and I see a U-Haul in the driveway and a guy moving stuff into the house. Pull over and roll down window. "Hey, you the new owner? Great house. We really wanted it also but that whole tank issue queered the deal" Huh, what tank issue? "You know, the one buried under the garage full of all the gas, oil, brake fluid etc..." What are you talking about? "The tank, you never wondered what that fill neck behind the garage is for?" What fill neck? "Oh man, don't tell me he cut the pipe and hid it. Theres a toxic waste dump under your garage. I'd call my lawyer if I were you"

As he stormed off with flames coming from his ears i looked at my wife and said, "I wonder what he was hiding in the attic"

notfarnow · 07-20-2010, 06:16 PM

Quote:

Originally Posted by stomachmonkey

I go to town hall and find permit for previous owner to extend garage and it indicates an in ground tank. Call an oil company to get estimates on decommissioning tanks. While waiting for them to show up I see a neighbor and ask about previous owner. Am told he was a wrench who did side work at the house on the weekends. Oil co shows up and we pop the cap and holy crap, it was obvious where the guy was disposing of fluids, oil, gas, brake, tranny, antifreeze, everything was in there. Dip tank and it seems pretty full.

...SNIP>>>

Fast forward a couple of months and we are driving down that street and I see a U-Haul in the driveway and a guy moving stuff into the house. Pull over and roll down window. "Hey, you the new owner? Great house. We really wanted it also but that whole tank issue queered the deal" Huh, what tank issue? "You know, the one buried under the garage full of all the gas, oil, brake fluid etc..." What are you talking about? "The tank, you never wondered what that fill neck behind the garage is for?" What fill neck? "Oh man, don't tell me he cut the pipe and hid it. Theres a toxic waste dump under your garage. I'd call my lawyer if I were you"

As he stormed off with flames coming from his ears i looked at my wife and said, "I wonder what he was hiding in the attic"

Did the guy get your info so he could pursue it legally? He would need to PROVE that the PO & Realtor KNEW that the tank was there, and you may be the only link.

Depending on local law, the listing agent could/should/would be liable as well, for not disclosing known environmental issues. By bringing it up in the negotiations, and subsequently backing away from the deal, the agent could NOT claim to not be aware. Serious stuff, right there.

I've lost listings over disclosure issues. It's touchy stuff

stomachmonkey · 07-20-2010, 06:35 PM

Quote:

Originally Posted by notfarnow

Did the guy get your info so he could pursue it legally? He would need to PROVE that the PO & Realtor KNEW that the tank was there, and you may be the only link.

Yes, but suggested he call the oil company as they had supplied a written quote for the decommission and their rep was the one who opened the tank. IE, dated, hard copy documentation with an independent expert eye witness.

Zeke · 07-21-2010, 05:35 AM

Quote:

Originally Posted by stomachmonkey

Yes, but suggested he call the oil company as they had supplied a written quote for the decommission and their rep was the one who opened the tank. IE, dated, hard copy documentation with an independent expert eye witness.

Smart. Now, if the guy is out of state, he probably skates. The RE agent might not.

john70t · 06:03 AM

Quote:

Originally Posted by notfarnow

If I had the right title insurance when I bought our house 6 years ago, it would have saved me $28k this summer.

This.
Jake, what does title insurance cover six years later?

The P.O. built our entire second floor somehow without a permit.
1). There was no soffit venting and all the roof sheeting/insulation had to be replaced. We pulled a roof permit.
2). The roof ridge beam sections were basically toe-nailed together, so the house could have split in half!
3). There were other potentially serious "issues"(IMO) brought back to within code, but this is all I can type on the public interwebz.

notfarnow · 07-21-2010, 07:59 AM

[QUOTE=john70t;5465274]This.
Jake, what does title insurance cover six years later?

[QUOTE]

I can't make a blanket statement, but up here there is one title insurance company that covers repairs for work that was done without permist or not to code. You have to due your due dilligence when you buy it, for example it must be professionally inspected. But years later, if you find that there are repairs needed as a result of previous renovations that hadn't been done properly, the title insuarance will cover it.

In my case, a foundation wall on the garage & breezeway between the house & garage were done wonkitudinally and halfassedly. It looked fine initially, passed the home inspection, but when things started to shift and buckle, major issues were found. No permit had been granted for the work, and it wasn't done to code. It would have been covered 100%, even years later. I've spoken to the title insurance rep, she said my case would be a no-brainer, black & white claim. No good for me now, but I can use it as an example when I am working with buyer clients, especially with older homes.

john70t · 07-21-2010, 08:41 AM

Ok, Thanks for the info Jake. I'll look into the paperwork.

We had a profesional inspector, but at the time there were only a few minor nail-pops...reasonable settling for a 20y.o. addition. The paint(primer) was soiled and looked aged.
Besides a few miswired outlets, everything else looked ok. It was winter and the inspector couldn't access the attic. The price had dropped $80K over a short time and it is in a good area. P.O. had put in expensive windows and siding, energy bills were low, and everything looked neat.
We had done our comps homework, and thought it was going to sell quick.

What we found out later was the owner re-drywalled everything shortly before putting it on the market.
Drywall covers a lot of flaws.

Sorry for the thread hijack. I hope my posts educates others from my mistakes.
Buyers should know how to quickly check permits, paperwork, etc. Your inspector and realtor may not find this.