Buying home w/possible unpermitted renovations (contingency, square footage, conversion, 2013)
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I am in the process of buying a home that is stated to have renovations without full benefit of permits.
I haven't yet had the home inspected but that is going to be step one. The home is sold "as is" with right of inspection.
The home is very nice (but kind of small) 1900 sq/ft including finished basement (6' ceilings), and on amazing waterfront property, and well worth (visually at least) the asking price with some seller concessions, however I'm wondering how bad the consequences of the permitting issues could actually be?
I feel as if the inspections come back with certain permitting issues I would prefer to ask for either compliance inspection to be completed or price reduction for the risk involved. I am in firm belief that unless there are very serious issues the home is worth the price and the potential effort involved. I am pretty certain that in the long run, even in worst case, we will not be 'totally screwed' value wise.
Just to note, we are expecting a child in September so this move will be in close proximity to our daughters birth. However in worst case scenario we have somewhere to stay if serious work is involved.
I am not totally sure about what was done that could have potentially needed permitting but this is what I believe is going on:
There are no structural issues. I don't think they changed any walls or layout plans, I don't believe the home has or ever had any load bearing walls on the first floor and the basement layout is untouched.
The kitchen was moved from basement to first floor, which included some plumbing and I'm assuming some electrical to accommodate appliances.
The basement was (re)finished with carpeting and paint. Since the kitchen was previously in the basement I don't believe anything major was done down there.
The upstairs was refinished, flooring, paint, electrical switches/sockets/covers, and upstairs bathroom. I believe almost entirely cosmetic with exception of the kitchen.
The home is located in Maryland. I don't believe anything about the home is "unsafe" and I'm sure the inspector will catch any inconsistencies with permitting and/or dangers and concerns. I will also be asking the realtor today but to anyone our there who may be able to give some insight I am curious as to what kind of consequences I could potentially face in the future?
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What kind of permits may have been missed? I *think* the main concern is the kitchen move, the electrical alterations and possibly the plumbing.
Will this get "caught?"
If so, what kind of fines and/or actions might be taken? I am assuming it would have to be inspected and confirmed to be up to code which could involve having to potentially cut into some walls to provide sight and possibly fix.
If it were to be 'inspected' and confirmed up to code, would that clear the way for the future, such as potential resale?
What might it take to have the already finished work properly permitted? I'm assuming as above that the work would have to be visually inspected with potential drywall removal.
I am in the process of buying a home that is stated to have renovations without full benefit of permits.
What kind of permits may have been missed?
Will this get "caught?"
When you use the singular "I"... do you mean you are a cash buyer?
And if so, do you intend to stay put for 20 years or more?
Then permits and inspections really won't matter all that much.
Though the price you pay must reflect the deficiency.
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If it were to be 'inspected' and confirmed up to code,
would that clear the way for the future, such as potential resale?
By an inspection firm? Nope. It won't do it now either.
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What might it take to have the already finished work properly permitted?
That's the $64,000 question. Of course it might end up being a $100,000 question too.
fwiw... Maryland is pretty tough on these matters. More Reading HERE
but it's really a County issue some of which are easier to get along with than others.
What projects are we talking about? Added a bathroom? Finished the basement? Deck? Carport or out building? Go to the Maryland Real Estate Tax Assessment website. That will tell you what the county knows about and the rest is your problem if you move forward. The appraiser may catch and note it, depends on the type of loan and if the lender cares. We had an appraiser make a note of an unpermitted basement rental unit. Okay, fine, we pushed it to the column don't sell this loan, and didn't worry about the basement turned rental - we liked the owners that were refinancing.
So besides your personal knowledge, and your lender possibly rejecting the property, you need to worry about insurance and warranty folks - both who could reject claims once you are aware of the unpermitted areas. Counties vary in their actions. Some will inspect and issue a permit (assuming workmanship is adequate), some may bill retroactively for the taxes not paid. No way around it, you need to call county zoning in the morning or go over there and stand in line.
Thanks greatly for the reply. I am a bit spooked but I'm still leaning towards confident that we will be happy and not have any serious issues.
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Originally Posted by MrRational
When you use the singular "I"... do you mean you are a cash buyer?
And if so, do you intend to stay put for 20 years or more?
I do mean me, as the buyer. It will be purchased through a lender though. I think it is very unlikely we will be staying there for 20+ years, unless we end up very happy there and to add a floor in the future otherwise we will outgrow the home.
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Originally Posted by MrRational
Then permits and inspections really won't matter all that much.
Though the price you pay must reflect the deficiency.
Agreed, at this point I am leaning towards likely asking for further concessions to balance the risk involved.
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Originally Posted by MrRational
By an inspection firm? Nope. It won't do it now either.
I was referring to a county inspector. Considering that I do not know the extent of the work and the county probably does not either, I'm not sure what or how they could inspect or determine what would be necessary to have been permitted.
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Originally Posted by MrRational
That's the $64,000 question. Of course it might end up being a $100,000 question too.
Considering it is a small house, the price is 199k and the tax estimate is at 249k. I can't imagine all of this being too involved or expensive if an issue were to arise?
Also, unfortunately not myself (I am a web programmer) but I have highly skilled friends and/or family in all of the relevant fields. In the event we were need to do something. Is there any way possible that I would be able to have the repairs done by them? This would likely save a tremendous amount of money and I am certain they are aware of all codes and requirements.
What projects are we talking about? Added a bathroom? Finished the basement? Deck? Carport or out building? Go to the Maryland Real Estate Tax Assessment website. That will tell you what the county knows about and the rest is your problem if you move forward. The appraiser may catch and note it, depends on the type of loan and if the lender cares. We had an appraiser make a note of an unpermitted basement rental unit. Okay, fine, we pushed it to the column don't sell this loan, and didn't worry about the basement turned rental - we liked the owners that were refinancing.
So besides your personal knowledge, and your lender possibly rejecting the property, you need to worry about insurance and warranty folks - both who could reject claims once you are aware of the unpermitted areas. Counties vary in their actions. Some will inspect and issue a permit (assuming workmanship is adequate), some may bill retroactively for the taxes not paid. No way around it, you need to call county zoning in the morning or go over there and stand in line.
So... I don't know too much about homes and I'm certainly not 100% sure what may have had been or needed to be permitted in the last round of renovation. But from what I can tell in before-after pictures now that I look is:
HVAC and ductwork was added. It looks like this may include removal of baseboard heating.
Kitchen was moved from the basement to the first floor, so I'm guessing certainly some new plumbing and maybe electric.
2 partial non-load bearing walls were removed that had either closeting or shelving... nothing I can see of importance but this may have involved removing some electrical sockets or switches.
One of the bedrooms was extended, possibly also involving removing/adding of switches/sockets.
I am not too worried about any warranties, but considering the above how will/could that potentially effect me in terms of home insurance.
According to SDAT information, the home is unchanged.
When contacting zoning, what exactly am I to be saying / asking for?
I apologize for probably asking stupid questions but don't they say no question is a stupid question? <- stupid question
Thanks greatly for the reply. I am a bit spooked but I'm still leaning towards confident that we will be happy and not have any serious issues.
I do mean me, as the buyer. It will be purchased through a lender though. I think it is very unlikely we will be staying there for 20+ years, unless we end up very happy there and to add a floor in the future otherwise we will outgrow the home.
Agreed, at this point I am leaning towards likely asking for further concessions to balance the risk involved.
I was referring to a county inspector. Considering that I do not know the extent of the work and the county probably does not either, I'm not sure what or how they could inspect or determine what would be necessary to have been permitted.
Considering it is a small house, the price is 199k and the tax estimate is at 249k. I can't imagine all of this being too involved or expensive if an issue were to arise?
Also, unfortunately not myself (I am a web programmer) but I have highly skilled friends and/or family in all of the relevant fields. In the event we were need to do something. Is there any way possible that I would be able to have the repairs done by them? This would likely save a tremendous amount of money and I am certain they are aware of all codes and requirements.
The onus will be on you to prove the modifications are legal, not the other way around - for electrical work, that might involve things like "mapping" all the circuits & calculating loads. You can probably get an idea of the level of workmanship by having an electrician look at the box. For a kitchen, there should be at least 2 small appliance circuits, a separate circuit for the microwave, gfci outlets, etc. it's entirely possible that *all* the electrical has to come out if it was diy work - things like "buried" electrical boxes mean everything has to go. That might not be the end of the world, might not be that expensive- but pulling new circuits will damage many finished drywall surfaces.
In nearly all jurisdictions, you can't pull a permit for diy work unless you live in the property. So licensed guys only.
You're unlikely to get a lender to bite if they understand the work is unpermitted. Wiring isn't necessarily that expensive, relatively speaking- a total rewire might cost $10k, so a $50k discount is already a substantial break, with a loan contingency this property likely isn't for you.
You missed my point:
The lender is likely to be even more of a tighta$$ than the County. And rightly so.
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...but I have highly skilled friends and/or family...
That's how the house got to the present condition.
Weekend Warriors.
Your biggest issue is the much too low ceiling height basement level and how that work likely
hides all the question marks the inspectors will be looking for as the Kitchen and Bath work.
In addition to the plumbing & electrical there will be structural worries too.
In short... I'd be very surprised if the basement won't require a complete demo in full
to return it to previous unfinished condition and allow for a full inspection of the P&E work & the framing.
It is highly unlikely the city/county will ever figure out you have unpermitted work. However, it will eventually come up- when you resell. This could become a huge headache.
I purchased a foreclosure in 2007. It had a garage conversion done. I hated it, but never had the cash to convert it back. I went to sell in 2013. House went under contract in less than 2 weeks. I'm not sure who on the buyer's side caught this, but the final inspection was never done on the conversion. Permits were pulled, but the current owner never had the final inspection. They lost the house to foreclosure around that time. I had no idea. I did have an inspection done. Property was as-is. No one caught it. Needless to say, the buyers pulled out. Because I was very cash-strapped without any equity, my agent said to just disclose it. My house lingered for months. After about 6 months, my agent decides we have to pull new permits and get the inspection done. I am living 750 miles away. He takes care of it all and it passes. Now, I have a stale listing. Eventually, I sold the house. My savings was gone. I was one month away from having to let it go back. I had to bring cash to closing to get rid of it. The same floor plan with fewer upgrades sold for 35% more than my house did and only in a matter of days. Mine took 9 months to sell. It was a nightmare. (I used the same agent to buy and sell it- big mistake. It should have been caught at purchase. Also, he gave terrible advice to just disclose it. I think he realized he steered me wrong because he took a reduced commission to help me out when it finally sold.)
Your answer is "It depends". It depends on what your county is like to work with, what your lender is like to work with, etc. We purchased a home with several unpermitted additions such as a basement that was finished without permits, a sunroom that was added without a permit, a garage and barn with water and power that were both built without permits, skylights added and a new roof all done without permits. We financed it, insured it, lived in it 10 years, and found a buyer who purchased it with full knowledge of the unpermitted status. No problem.
The problems came because the work was done quite substandard. Over the years we found HORRIBLY dangerous wiring in the crawlspace that could have burned the house down. It had to all be ripped out and re-done. We had floor cracks in the tile of the sunroom and grout that crumbled out because the tile was laid improperly. We had crazy electrical problems with circuits that made no sense and were constantly tripping breakers. Several outlets were dead. We had water leaks around the skylights in the sunroom and had to have the ceiling repaired and repainted. We had a tiny roof leak in the very peak of the roof that we never did figure out after having two contractors attempt to repair it. The roof shingles and the gutters were not done properly, so we had eaves and rafter tails with dry rot that had to be cut out and replaced. NONE of these issues was found in our home inspection when we purchased the place, but were found by us over the 10 years we lived there.
I have no advice for you except "buyer beware".
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