Selling a House with Unpermitted Work
Picture this: you're excited as you plan to list your home for sale. It was once your dream home, but you've decided you're ready to move on. You list the amenities, confident you'll get a great price for it:
- An extended deck where you spent plenty of afternoons reading.
- A game room in the basement with a working bathroom.
- Oh, and also that sunroom you were enjoying.
Perhaps the house already had all these when you bought your home. However, upon checking the plans, these improvements aren't there! You can't be sure whether the previous homeowners secured the required permits for these additions. There is the very real possibility that you discovered unpermitted work prior to selling your home!
In order to help you, we came up with this guide to help you navigate selling a house with unpermitted work and what you can do about it.
What Constitutes Unpermitted Work?
Unpermitted work is simply home improvements done without obtaining the necessary permits from government entities.
You might think this is just a trivial paperwork issue, but that is not how permits work.
What are Construction Permits and What is Their Purpose?
A construction or building permit is a legal document issued by the local building authorities allowing you to proceed with construction on a project. It ensures that the work to be done meets important requirements that minimize the possibility of structural collapse, fire, or electric shock. If you'd like to have some work done on your house, expect to spend between $400-$2,300 on building permits.
Proper permits protects you, the homeowner, from a contractor's shoddy workmanship, which can be a threat to your life and safety. An inspector reviews the work to ensure that it is compliant with building codes and doesn't put the lives of the occupants or the community at stake. For example, you wouldn't want an unqualified contractor to do electrical work on your home, would you?
But despite that, you may be wondering...
Why Do Homeowners Intentionally Skip Permits?
Permits Can Add a Substantial Cost to the Project
The cost of permits are usually based on the scale of the alteration. The bigger the work, the more expensive the permit, so many homeowners choose to do away with it because they'd rather be spending money on the actual work.
Permits Can Cause Property Taxes to Go Up
Home improvements such as an additional wing, a fully finished basement home theater, or a deck extension can drive up a property's value. And so it is possible that this increase in value can trigger an increase in property taxes as well.
It can therefore be tempting not to apply for a building permit so the town won't have a record of this home improvement and the assessed real estate value will remain flat.
Permits are a Hassle to Get
Sometimes getting permits involves multiple trips to the city's building department, and this hassle can discourage homeowners from going through the proper channels.
Permits Take a While to Obtain, Causing Delays
When applying for permits, sometimes it is required to submit engineering plans which will be subject to review by the local board. This review may take time, and there are instances where revisions are needed. This will be again subject to review, delaying the start of the project even further.
Skipping Permits Can Have Future Repercussions
Many homeowners think they'd ultimately save money by not pulling the required permits; or perhaps, they got the house from the previous owners with unpermitted work.
But, even if you think you'd be holding onto the house forever after doing unpermitted renovations, this could still come back to bite you in the future. It's possible you may suddenly need to sell due to circumstances outside of your control.
In the process of selling a house, your potential buyer may want to look at the permit history. There's also no one stopping the buyer from ordering a home inspection, and if they find fault, or worse, building code violations in previous unpermitted work performed, you will have to face the consequences of your past decisions.
How Do You Apply for a Building Permit?
Permit requirements vary from state to state, and the only way for you to find out whether your remodeling project will require permits is to get in touch with the local building permit office or check out their website.
Home Improvements that Require Proper Permits
Generally, home improvements that involve changing something in the structural, mechanical, electrical, and plumbing systems of a house need a permit. These include:
- Addition of a shed
- Home expansions - additional wing, deck, or patio
- Fences over a certain height, usually six feet
- New electrical wirings or upgrading to a higher amperage
- Changes in the ventilation, heating, and air conditioning systems
- Additional bathroom or bathroom remodeling
Still, there are other projects that may seem like minor work, but they would still require permits:
- Adding partition walls
- Replacing windows and doors
- Relocating plumbing fixtures
- Removing a tree in your yard
Like most homeowners, you can't be expected to know which work requires a permit. If you plan to do renovations on your own, it is recommended that you get in touch with the local building department to find out.
Fairly common basic repairs and remodeling such as minor electrical repairs, repainting, changing carpets, repaving driveway, hardwood floor installation, carpeting, and replacing cabinets do not require permits.
As an alternative, you can hire a contractor to do the renovations. Just make sure they are a licensed home improvement contractor. Some contractors are not licensed, so getting a registered contractor eliminates the risk of ending up with someone who may do the job incorrectly. Furthermore, they typically handle the permitting process on your behalf for a small fee, but at least you don't have to deal with the hassle of getting all the permits yourself.
Dangers of Unpermitted Improvements
Since there is no one to check the quality of work, you can't be sure if it complies with local building codes.
Unpermitted work presents dangers such as:
- Faulty electrical systems installation - fire or electrocution
- Incorrect plumbing work - burst pipes or leaks, which can provide an environment conducive for mold growth
- Improper roof installation - roof may be blown away or may have leaks
- Inadequate carpentry work - structural collapse
Furthermore, damages arising from faulty unpermitted work won't be covered by your home insurance. To avoid flirting with danger and literally playing with fire, it is better to get permits before starting anything.
Can You Sell Your House with Unpermitted Work?
Yes, you can sell your house with unpermitted work! There are two options open to you: deal with the unpermitted work yourself by getting a new permit and redoing the work, or sell as is and let the buyer fix it themselves.
Option #1: Obtain Building Permits and Redo the Work Before Selling
Plenty of home buyers rely on bank financing to fund their home purchase, and usually their loan approval is contingent on the property being in good condition. Additionally, if buyers purchase a house with unpermitted work, their lender can demand an immediate loan repayment.
To avoid this, mortgage companies order a home inspection. If the building inspector finds faulty repairs arising from unpermitted work, you will be required to rectify it.
To get ahead of this kind of hassle, you can arrange the inspection yourself. A home inspection costs between $250-$600 and the resulting report will be able to tell you the present issues in your home and what you can do about them.
If the unpermitted work is considered safe and in working condition, you can check with the local government if you can apply for a retroactive permit. Otherwise, you may have to redo the work. It all depends, so we recommend getting in touch with them to check the requirements.
Afterwards, shop around for reputable contractors who can give you an estimate of the renovation costs and how long the job will take so that you can factor it into your house selling timeline.
Doing all the repairs would allow you to possibly get top dollar for your home. If you have the time and funds to invest in repairs upfront, confirm how much of the cost you will recoup in the sale.
If all of this sounds too time consuming for you, then you can just...
Option #2: Sell the House As-Is
Selling as-is frees you up from the burden and difficulties of arranging inspections, applying for permits and looking for and filtering qualified contractors.
If you want to sell fast, you can consider selling to cash buyers such as house flippers and "we buy houses" companies. They intentionally find houses which are problematic, including houses with unpermitted work, that they can purchase below market value in order to perform the necessary repairs and either flip the home or hold it as a rental .
The cost of all the repairs are factored into their cash offer, so although you may sell for a lower price to a cash buyer, they save you time and effort. Cash buyers can close on your house fast, usually in as little as a week since they are not banking on the approval of a mortgage.
A cash home buyer has the cash available to purchase your property, and a professional construction crew ready to proceed with the required renovations. As an added bonus, they shoulder all the closing costs associated with the sale.
How to Sell a House with Unpermitted Work
Selling a house with unpermitted work can be done through a real estate agent. However, this method attracts retail buyers. We'll discuss the associated roadblocks and why selling as is to a cash home buyer is common when sell a house with unpermitted work.
Selling through a Real Estate Agent
There are a few roadblocks you might hit if you sell the traditional way with real estate agents. Most home buyers want a property they could move into immediately where they won't be saddled with repairs, so selling as-is can be more challenging on the market.
Therefore, local agents will either request you to do the repairs yourself so they can stage the home for sale and do open houses or list below market value. After the sale closes, you'll need to pay their fees and all the associated costs with selling a house.
Selling to a Cash Home Buyer or a Real Estate Investor
Selling to a cash buyer means you get cash for your home despite doing very little to the property. You don't have to bring your house up to code by rectifying all the unpermitted work-- that will be the responsibility of the buyer.
Further there are no agent fees to pay or closing costs. So, you end up saving money on repairs and you get money for your home without the time investment.
Things to Consider: Selling a House with Unpermitted Work
See if You Can Apply for Retroactive Permits
If you discover unpermitted work in your home, it is in your best interest to have it inspected. If you find that it is safe, then you can try applying for a retroactive permit.
Retroactive permitting is similar to a regular application for construction permits, but the only difference is, instead of proposed plans, the city building officials will review as-built drawings (i.e. what is actually constructed) and inspect the work.
Securing a retroactive permit means you don't have to redo all the unpermitted work and you can get a higher price for your property!
Disclosure is Paramount
If you knowingly avoid disclosing unpermitted work on your property, you may end up in legal trouble. Even in caveat emptor states where you are only legally obligated to make certain disclosures such as the presence of asbestos, lead paint, or mold, it is still better to be safe.
Doing this will show potential buyers that you are dealing with them fairly and honestly, and this builds trust, which is the backbone of every business transaction.
Check if the Previous Owner Can be Responsible for Part of the Renovation Cost
If you unknowingly bought your home with unpermitted work, you can try getting in touch with the previous owner. It can be worthwhile to meet with a real estate attorney so they can help you explore your options.
Key Takeaways: Selling a House with Unpermitted Work
You don't save money by not getting the required building permits before you undertake that home improvement project. You're just delaying the inevitable, and it will end up giving you a future headache.
On the other hand, if your property already has plenty of significant unpermitted work, it won't prevent you from selling your home. Cash home buyers specialize in these types of properties.
At Sell My House Fast, we are happy to provide real estate solutions to distressed home owners by taking the problem property off your hands. No need to arrange an inspection, go through the hassles of retroactive permits, or correct unpermitted work-- let us deal with them!
We buy houses for cash in any condition, including those with unpermitted work that may or may not have building code violations. No house is too troublesome for us!
If you'd like to see our cash offer for your home, just fill out the form below with your email and your property address.
Have questions? You may reach us at (844) 207-0788 and we'd love to discuss with you.