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Silver Regular Contributor
DWBowers
Posts: 639
Registered: ‎01-02-2008
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Remodel Without Permits a Deal Breaker?

An issue was raised in one of the posts here about remodeling without permits.  So I want to get more insight from all.  

 

Is it a deal breaker for you if you read in a Form 17 Disclosure that an interior remodel was done without a permit? 

 

I know a lot of people remodel their kitchens, bathrooms, basements, etc without a permit.  It seems to me that most wise buyers will have a home inspection done prior to purchasing anyway so is this really a deal braker for you?

 

It seems that any potential issues will be raised during the home inspection and then a buyer can negotiate to have the issues resolved. 

 

 

 

 

Trusted Contributor
Sleepwalker
Posts: 195
Registered: ‎04-24-2010
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Re: Remodel Without Permits a Deal Breaker?

 

I had someone turn our rotting awning into a nice 2nd floor deck. I decided to skip the permits for cost and tax reasons. I've got the receipt for the 10k job, so I'm not worried about it on resell.
Even permitted work can suck. As a buyer, I don't worry about it as long as I have a good inspection team. I'm sure others care though. In Ballard, I'd guess over 50% of home improvement work is unpermitted.

DWBowers wrote:

An issue was raised in one of the posts here about remodeling without permits.  So I want to get more insight from all.  

 

Is it a deal breaker for you if you read in a Form 17 Disclosure that an interior remodel was done without a permit? 

 

I know a lot of people remodel their kitchens, bathrooms, basements, etc without a permit.  It seems to me that most wise buyers will have a home inspection done prior to purchasing anyway so is this really a deal braker for you?

 

It seems that any potential issues will be raised during the home inspection and then a buyer can negotiate to have the issues resolved. 

 

 

 

 


 

Silver Regular Contributor
DWBowers
Posts: 639
Registered: ‎01-02-2008
0

Re: Remodel Without Permits a Deal Breaker?

I would guess the percentage is well over 50% for the City of Seattle.  Most owners don't want to spend the money on the permit and have their property taxes increase because of a remodel. 

 

I can understand why you'd need a permit for any structural improvements, outside additions, etc. but is a permit really necessary for a kitchen remodel? 

 

I'm interested to hear if this is a major issue because I have an offer outstanding on a Magnolia home and they had their kitchen remodeled wihout a permit.  If my offer is accepted I'll have the home throughly inspected to make sure everything is fine before I purchase the home. 

Regular Contributor
willb
Posts: 66
Registered: ‎05-24-2010
0

Re: Remodel Without Permits a Deal Breaker?

[ Edited ]

I have a friend who bought a house with a remodeled attic and no permit. If I remember correctly, the warnings at the time of sale were something like:

 

City may ignore it, nothing happens (most likely scenario)

City may ask owner for the permit fee (not likely, but it may set you back a few thousand)

City may order you to revert the construction, even though previous tenant did the remodel. (highly, highly, unlikely. )

 

Please note this is hearsay from many years ago, I have no idea what the laws actually are, and I'm not aware of the last option ever happening to anyone in practice. But regardless of the quality of the remodel, the possibility of it ever happening might deter some buyers.

Trusted Contributor
Sleepwalker
Posts: 195
Registered: ‎04-24-2010
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Re: Remodel Without Permits a Deal Breaker?

Come to think about it. My entire attic conversion into a master bedroom with a bathroom is an unpermitted remodel. Gotta figure I'm saving about 1k a year in property taxes because my 3/2 1600sf home is actually assessed as a 2/1 1000sf home.

 

Curious to find out how much more people would pay if the work was permitted. When I bought the place, I wouldn't have paid any more for a permitted attic conversion, but I can certainly see it as a liability now.

Silver Regular Contributor
AvocadoApplnce
Posts: 655
Registered: ‎03-05-2010

Re: Remodel Without Permits a Deal Breaker?

I would worry about permits for exterior features and outbuildings, but I'm not sure about interior changes. Does legal documentation exist of what the current interior state of a house is? If I knock out a wall and update some fixtures, and supposing the local government even cares that I did this, is there any way for them to prove that anything had changed in my house? How about in the case of a developed attic?

Regular Contributor
seaca
Posts: 181
Registered: ‎02-08-2009

Re: Remodel Without Permits a Deal Breaker?

I think where this seriously comes into play is in a few scenarios -

 

My cousin wanted to purchase a 4b/2.5ba home. Makes an offer and it gets accepted by the seller, who had self installed a 4th bedroom. He went to get a mortgage.  Appraiser comes back and says, per County records the home is 3b/2.5 ba, and so the home is not worth $365K, it was only worth $340K, and the bank will only loan based on the actual county and accurate records. So, no permit, no 4th bedroom - "Officially".  The appraisal allowed my cousin to negotiate a lower offer price.  The County did not come out and do anything.  Net, I don't think anyone alerted the County of the 4th bedroom, and the bank just balked that the house was not worth as much as a "real" 4b/2.5ba house, and would only loan to their threshold for a 3b/2.5b home. Problem solved.  I think they found the work was done to code from an outside inspection and left it as is.

 

My brother in law, a licensed engineer and former County inspector  - not in the State of WA -says the worst that typically happens is they would probably need to pay for the permits, which pays for the inspection, no one goes to jail, etc.  It is still buyer beware and you may want to have that inspection done by a licensed contractor before you purchase uninspected and unpermitted work (faulty wiring, etc. - can be an insurance issue too) depending upon what the change was.  Insurance is another hurdle you'll need to cross when you buy unpermitted work.  If you go to insure the house you usually have to have the insurance inspector  visit the home or answer some quesitons about if your home has unpermitted work.  Insurance inspectors examine county records too. I don't think insurers are too worried about having added new kitchen cabinets and granite counters and if you're paying enough in taxes. They're more worried about new electrical wiring done by qualifed contractors and issues that impact insurance risk.

 

My brother mentioned typically the times when someone has to unwind the work is if the completed and unpermitted work is found to be a safety hazard or serious code violation. In his county examples,  that would be unpermitted work to turn part of a garage into a bedroom, or where people have added a garage on to a carport and it breeches the set back requirements to the street or to a neighboring lot. (Neigbor complaint is a big reason stuff has to be torn down if visible from the outside) He said typically garages are not property vented/insulated for inhabitants and thus it is not considered "living space" suitable for a bedroom, unless all of the permitted upgrades have taken place and inspected.  They will let it stay if the work was done to code and meets standards.  A bedroom in a garage not done to code will be asked to be un-done.  A secondary unit built on a lot which doesn't allow secondary units will be asked to be removed.

 

I do see one home on the market that is listed as a 4b/3.5ba 4,000 square foot home listed as a "entertainers dream on lower level", but when I look at the County records the home is a 3b/2.5ba 3,000 square feet with unfinished 1,000 square foot basement.  Basically, the basement from what it appears was finished out without the County being aware of that taxable change (very common).  As long as the seller discloses it was unpermitted work, the buyer beware (though the seller could later be held liable if someone got hurt due to unpermited saftey hazards).  Also of the seller may have to reduce his price eventually, if a bank is brought in for an appriasal for a mortgage or to get it insured.  Maybe they'll get lucky, the buyer won't ask any questions, ask for any inspection, and they'll pay in cash.

Platinum Super Contributor
Nanomug
Posts: 10,372
Registered: ‎05-30-2009

Re: Remodel Without Permits a Deal Breaker?

Insurance could be an issue with unpermitted items.  If electrical is does not have a permit and that causes a fire some insurance companies will not pay out.  If the total home was lost in fire or other disaster then the insurance is likely not to pay out for the unpermitted portions.

Regular Contributor
MrMoto
Posts: 83
Registered: ‎07-17-2007
0

Re: Remodel Without Permits a Deal Breaker?

I think someone who is in insurance should respond to that claim.

 

 

If you stated your home as the real size and value, there may be no issue.  Also much undocumented work is within code.

 

my understanding is that people often dont get permits because then they might have to upgrade other pretty much unrelated stuff. and have to pay BS taxes on the things installed. Plus all the fake "inspections "  the city charges you for...

 

Silver Contributor
duplex
Posts: 456
Registered: ‎10-05-2007
0

Re: Remodel Without Permits a Deal Breaker?

I found this from city-data (http://www.city-data.com/forum/new-jersey/931558-missing-permits-buyer.html).  Insurance companies do not know local code requirements and do not enforce them.  Further, many insurance companies will ensure properties with obvious code violations (e.g., knob and tube wiring in older homes).:

 

Although I've seen some similar urban-legend conjecture on internet forums, having been involved in property-casualty insurance for 34 years as an underwriter and agency owner, I can't say that I've ever seen a claim legitimately turned down because a building permit was not obtained prior to a loss. It is just not part of the underwriting, sales, or claims settlement process. 

Nothing in any property insurance contract I've ever seen contains any exclusionary language for claims affecting buildings where permits were not obtained. If anyone knows of such a clause, or can point to a specific claim or case where this was a documented part of the denial, I would like to see it. 

I'm not privy to business plans of property-casualty insurance carriers, but I seriously doubt that using this reason to deny claims would be found in any of them. They turn down plenty of claims for other reasons, but not for this.

There are good reasons to obtain necessary permits, but threat of a claim denial is a hard argument to make. Maybe it should be, but it is not at present.