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Blog Post > Unpermitted Work

What is Unpermitted Work? Unpermitted work is construction on a home that does not carry the necessary permits to make it legal per local ordinances. Additions to homes and finished basements are some of the most common.....

Friends,

I want to wish all of you a Happy New Year and welcome to the second edition of the roaring '20s.  The new decade starts with record highs in the stock market, and frankly, all markets are doing quite well.  The real estate market is up, consumer confidence is up, interest rates are low, and basically, this is the best economy of our lifetime.  The only thing that could screw this up is government intervention. 

Speaking of Government intervention, most of you know that I started back in Annapolis for the 441st Maryland Legislative Session.  The legislative session ends mid-April, and during this time, my focus is to be the best legislator possible for the citizens I represent.  So during this time of year, I am a part-time Realtor, but please keep the real estate referrals coming!   If I can not handle the real estate needs for your friends and family, I can point you in the right direction.  I know several very good agents, and I will make sure your friends and family will get a like-minded individual to make their purchase or sale as smooth and profitable as possible.  So please, if you know someone considering buying or selling in the Southern Maryland area, please do not hesitate to give me a call.
My goal this year is to bring back my monthly newsletter!  To my surprise, I had more than a few past clients ask me why I stopped sending them out.  The answer is simple…… They take a lot of time….. I do feel it's important to bring as much value to my friends as possible, and I want to thank you for reading my real estate newsletter and my weekly political post ahead of time. 

This year, my goal is to do my best to get a mid-month Real Estate newsletter out monthly.

This month I would like to share an article about Unpermitted Work and the possible problems it could cause.  I have had this situation happen many times on different real estate deals during my career.  It seems everyone in Southern Maryland knows a guy to do some work under the table.  That is understandable, and besides, who wants to pay more taxes to the government?  Not me, but not wanting to deal with getting permits could cause you some headaches in the future.  I hope you find the article useful. 

Warm Regards,

Matt

What is Unpermitted Work?

What to do about unpermitted work? Unpermitted work is construction on a home that does not carry the necessary permits to make it legal per local ordinances. Additions to homes and finished basements are some of the most common. What should you do about unpermitted work when buying or selling a home? Good question, right? Whether you are a buyer or a seller, improvements done without permits can prove to be an expensive and time-consuming hassle.

Working as a real estate agent for the past fifteen plus years, I can't tell you the number of times someone has asked me if they should pull a permit. My answer is always a resounding YES if it is required.

The question becomes what should you do as a buyer or seller when you find work that has been completed without permits? Unpermitted work is a blanket term that applies to any modifications made to the home that should have been permitted but were not. The work can include most components of the home—electrical, plumbing, and structural, etc. The permitting laws are different depending on the area, so what might require a permit in one place may not in another.

Getting permits for home improvements where they are required is vital if you don't want problems somewhere down the line. That is why every homeowner should always be aware of local regulations before making any significant changes to their home—and why it is essential to hire licensed contractors with good reputations who won't work without obtaining proper permits.

Most unpermitted work is done without permits to save money. Getting the proper permits, and doing the work in a way that will meet current regulations, can be more expensive than just winging it.

For homeowners that plan on staying in their homes forever, unpermitted work can seem even more appealing. Unfortunately, whoever winds up buying the house, and then eventually selling it, is going to have to bear the repercussions of the earlier owner's decisions.

Some owners intentionally don't pull permits, so their assessed real estate value remains artificially low. For example, let's say an owner finishes their basement with a home theater, a full kitchen, and a gym. Sounds pretty impressive, doesn't it?

Well, it is, and today's basements with all their bells and whistles can be pretty expensive to finish. Now think of the savings each year when the local municipality is not collecting the value of the basement in the form of taxes. It is easy to understand why some people try to screw the town out of their money.

Doing so, however, is short-term thinking that will have long-term consequences.

When buying or selling a house, it is vital to have building permits for any construction or improvements.

Buyers—Risks Associated with Unpermitted Work

It's risky to buy a home without permits. What should you do when buying a home that was remodeled without a permit? Good question, right? With the best deals, there is always a catch. In the case of homes for sale, the catch is often nonpermitted work.

A home that has unpermitted work is a home with baggage, and those homes could end up selling cheaper than their permitted equivalents. As a buyer, you should know what you are getting into before you agree to purchase a home with no permits for work that requires them.

You will take over responsibility for the work with no permits.

In many states, you will be asked to fill out a seller's disclosure form accurately answering all the questions. One of the questions will more than likely be, "was there any work during your ownership that required a building permit"?

All unpermitted work must be disclosed to any buyers when you decide to sell the house. That means that you will need to tell them about it if you sell, and offer a discount just as the current seller is doing.

You can still be penalized for the unpermitted work.

It is not common, but from time to time, county inspectors do come down on homeowners with unpermitted work. The difficulties could include being required to get the work permitted—which may consist of hiring an architect, making changes to meet codes, etc.

In some towns, it is entirely possible they could make you rip out the entire project. Can you imagine owning a home where the local building inspector makes you remove your finished basement? It is a nightmare scenario – one that you should never say it won't happen to me.

The cat will also be out of the bag as well, so you might be required to pay taxes based on the difference in square footage.

Your homeowner's policy may not cover the unpermitted additions.

The insurance policy you rely on to protect you may not do so if something happens in a nonpermitted part of the home. For instance, if someone falls and gets hurt in an unpermitted addition, trying to collect on your insurance policy could see you going through a complicated lawsuit.

Your neighbors can always call you out.

You hope that your new neighbors will be great, but that is not always the case. If the neighbors are aware of the work done without permits, they can always contact the local authorities and tell them about it.

Buyers—What to Do about Unpermitted Work

Buying a Home with No Permits for Work You have several options when you discover that a home you want to buy has work completed with no permits. These include:

Take the deal.

If the deal seems reasonable enough, maybe it is worth it to you to get the home and accept the risks involved. You could always plan on correcting the issue later on. As long as you are willing to spend the money, you can usually get permits.

Most communities would rather have you point out the fact work was done without permits and get the problem squared away. The town will be able to collect their fees for the permits along with re-assessing the property for increased tax dollars.

Ask the seller to fix the problem.

If the seller is giving a discount to sell as-is, chances are he or she is not interested in fixing the problem. But if you want the home and have issues with the work not being permitted, it can't hurt to ask.

The seller may find that getting their home under contract is worth their time and effort.

Find another home to buy.

If the issues associated with buying the home are too much for you, know that you are not alone. Plenty of buyers are not interested in taking on all that such a purchase entails. Feel free to keep looking. You will eventually find the home you want that has no permitting issues.

Sellers—Finding Out Your Home Has Unpermitted Work

Sellers that know their home has unpermitted work are usually aware of the fact that they might need to offer a discount to sell as-is.

If you are one of the unlucky ones who discovers you have unpermitted work when you decide to sell, then you will need to decide on how to approach the situation. You do have options, even if none of them are particularly appealing.

Determine if there is unpermitted work.

Selling a Home with Unpermitted Work? Find the blueprints for your home and check them against the current construction to see if anything has been added.

If you cannot find blueprints, you may try obtaining them from the previous owner or through county records. Once you know what has been added, you can determine if a permit was needed and if one was obtained.

You can search for permits through the county's building department. Some offer online searches. If not, you will need to call or visit to verify the permits on your home. Towns often have what's referred to as "field cards" that show the permit history for a property.

If you do have unpermitted work, decide if you will sell as-is or get a permit.

Selling as-is could require you to offer a discount, sometimes a severe cut, to attract buyers willing to take on all the risks associated with the nonpermitted work. It's not advisable to attempt to sell the home without disclosing the unpermitted work, because doing so puts you at serious risk of a lawsuit. In fact, you will need to include the unpermitted work in the listing for the home. Not disclosing property defects is away a lot of people get themselves into hot water.

Selling as-is means you could lose some money, so you might consider getting permits. Before you make a final decision, get a clear idea of what the costs will be to get those permits. Each county has different options and requirements for obtaining such permits. Educate yourself on what you will have to do in your area, and find out what it will all cost.

You will likely need to apply for a permit, then if the unpermitted work is extensive, hire an architect or other professional to draw plans for the existing work—and proposals for any changes that will need to be made to bring it up to code. Then you will need to get the plan approved by the county. After you get approved, you will need to complete the project and have it inspected.

In many communities, you will be asked to go through a series of inspections with various inspectors, including:

  • An electrical inspection.
  • A plumbing inspection.
  • A final general inspection.
  • An inspection by the local assessor.

All of this can get expensive if the building inspector requires you to modify the work, sometimes more costly than the money you will lose selling the house as-is. If you just asked, however, to get the appropriate permits, it shouldn't be too bad. Home Advisor has a good reference on building permit costs worth a look. You can also check with your county or town to get a better handle.

Nonpermitted Work Can Cause Secondary Problems

Another problem that occurs is when a previous owner does unpermitted construction adding rooms, and it makes the septic system too small for the property. This situation is what's referred to as bedroom count misrepresentation with a septic system. In the reference, you'll see how easy it is to represent your bedroom count when your septic capacity does not match.

See if someone else is responsible for part of the cost.

If you were sold the home without being told about the unpermitted work, you could get some help from the previous owner or the agent you worked with for the permitting. Consult with a real estate attorney to be sure of your options.

By Realtor, Bill Gassett