You’ve spent hours poring over the finish, tiling, or paint color for your home renovation…but did you take time to consider permits?
For many homeowners, this small detail slips through the cracks, then becomes a problem when they want to put their house on the market.
Unpermitted work on homes happens. What matters is the actions you take next in the event of the sale. Obtaining a permit could lead to costly transactions, but unpermitted work could scare potential buyers away, or drive down the price of your home.
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How do permits work, and why do you need them?
Even those smaller projects you can knock out in a weekend could require a permit.
There are very few items that you can construct without legally being required to get a permit.
Simple projects like paint, floor installation, and minor electrical repairs likely won’t need a permit, but if you want to add a fence or window to your home, there’s a good chance you do need one.
It might just sound like complicated bureaucracy, but permits are meant to serve as a safeguard for homeowners. Permits for projects ensure that the work complies with local policies like land use, zoning, and construction. That means the future structure will be safe for you and future occupants.
Many forgo the permitting process because they think it can be tedious and complicated. Depending on your city or county, the process likely looks something like this:
Reach out to your local building office right off the bat. Let them know which project you’re planning. Depending on the complexity of the work you plan to do, you might need multiple permits for construction, electric, and plumbing.
Fill out the permit as completely as you can. Include drawings and schematics where possible.
Submit the permit and pay the filing fee. If your permit is approved, you’ll receive an official license. Depending on the complexity of your project, this permit could be approved on the spot, or need additional review.
Post the permit (those bright orange signs you’ve likely seen before) on your home or close to where you’re completing your project. You’ll need to get the permit before any work is done.
Depending on where you live and the particular project, you’ll need to get an official inspector to come check out the work. If the inspector recommends changes, they’ll need to visit again to confirm you’ve made them.
After approval from the inspector and completion of the project, you can remove the permit.
How can I tell if my home has unpermitted work?
Unless you’re the first person to occupy your home, chances are you don’t know everything that’s been done to the property.
When you’re getting ready to sell your home, having a complete history is helpful. That means figuring out if any of the work in your place is unpermitted.
An easy way to find out if some improvement was performed without the benefit of a permit is to go to the city or county and pull all records from the building department and planning departments.
From there, you can check to see if your home matches the plans of the permits. If not, chances are something was done without approval.
Going down to the city or county building might sound complicated, but it’s very easy to pull the permits up. There’s no cost to it. Just your time.
These records can give you the most complete history of your home in regards to permits. Pulling the records yourself also means you’re getting in front of the issue. You’re not waiting for an inspector or potential buyer to bring it up.
My house has unpermitted work: What now?
If there’s unpermitted work on your property, you’ve got two main options when it comes to the sale of your home.
Option 1: Sell the house ‘as is’
The key to selling a house “as is” with unpermitted work is disclosure. Make sure buyers know what they’re getting into by disclosing unpermitted work in the listing.
Depending on the nature of the unpermitted work, sometimes being as upfront as possible is enough.
But when it comes to large-scale unpermitted work, you may have to decide on a discounted rate on the sale of your house. The new buyer will now assume responsibility for that unpermitted work.
If there was a utility easement underneath the addition, the city or county could ask the new owner to tear down the addition, with no repercussions on their end.
Some recommend when valuing a home with unpermitted work that you don’t take that work into the market value of the home. For example, if you have a two-bedroom property, but the second bedroom was built without a permit, you might choose to value the property as one-bedroom.
Depending on the amount of risk the buyers will assume with the unpermitted work, they might run into problems financing the sale through a bank.
In that case, you might decide to request as-is cash offer from a cash buyer like Easy Outs Homes with just the click of a mouse.
Option 2: Obtain retroactive permits
There is another route you can take. You can go back to the city or county and obtain a permit retroactively on already completed projects.
In some cases, inspectors will simply ask you to open the walls of some construction. In others, they might ask you to tear down and rebuild portions based on their feedback.
If you are obtaining a permit for work of a previous owner, the city or county may be more lenient with you. They won’t charge you for any penalties a retroactive permit incurs and might give you more flexible deadlines to bring the work up to code.
The cost associated with retroactive permitting will depend on the scope and value of the construction. Before going to the city to obtain a permit, you might want to hire a contractor to examine the existing work—they can ballpark the cost of bringing it up to code and have an idea of how much is already built in accordance to current code.
The decision to obtain retroactive permits should be made before you list your home.
Buyers are usually looking to close usually within 45 days. And if you have a big retroactive inspection permit situation, like on a basement finish, you could be looking at several weeks to a few months to get all of those t’s crossed and i’s dotted.
Obtaining a retroactive permit can allow you to maintain the value of the home, making for an easier sale down the line.
Construction Permits Are Relatively Expensive to Acquire
Construction permits for houses aren’t cheap. A lot of homeowners will go with an “under the table” contractor who can do the work for cheaper.
But those contractors are cheaper because they are not following through with the correct permitting requirements per local building codes. They are saving money on the renovation costs by not paying for building permit costs.
But sometimes the contractors lie. (Big surprise here.) Shady contractors will charge homeowners for building permits that they never go and get. When contractors charge homeowners for construction permits that were never pulled, it exposes the homeowner to lawsuits and thousands in repairs.
Not only will you have unpermitted work lingering on your house, but you will have to hire another contractor to REDO the work. They have to redo it because the work that needs permitting is usually in the walls – like electrical, framing, insulation, structural, and foundational work.
The new contractor will have to tear apart the work that your first contractor didn’t get permitted to access the parts of the renovations that need to be permitted.
Home Construction Permit Laws Are Constantly Changing
Local building permitting laws change all of the time and, the fact is, that it could happen to you or the previous owners. Local home permitting laws are very local and they consistently change, so keeping up with them can be very difficult.
When you are having work done on your house, ask the contractor about what work needs to be permitted. To stay on the safe side, have the contractor show you the local building codes that prove that you do not need permitting if they tell you there is no need for permits.
If you end up needing construction permits to be pulled, have the contractor show you proof of the permits that they pull. But beware, they can replicate and fake building permits.
So call down to the local permitting office and ask them to verify the permit number that you contractor gave you. This way you ensure that you avoid having unpermitted work done on your home.
Whether you should opt to get a retroactive permit depends on your time and budget. If you’re on a tight timeline, you might decide to list your property without permits and disclose the work, understanding that the home will likely sell for less. If you have the time, getting permits means a smoother sale and higher offers from future buyers.
Other considerations to keep in mind about selling your house with unpermitted work
Unpermitted work can affect insurance. For example, if a new electrical panel was installed, but it is not to code and was not inspected there could be significant insurance ramifications.
If unpermitted work is disclosed, the buyer will assume future responsibility. If unpermitted work was disclosed to the buyer before the close of escrow the buyer will be responsible for any consequences.
If unpermitted work causes damage to the buyer, they have options for legal recourse. Even if the buyer knows about the unpermitted work, they can still pursue damages.
You are legally obligated to disclose all unpermitted work you are aware of, even if it’s from prior owners. Make sure to communicate everything you know about unpermitted work on your property. Withhold information from potential buyers, and you’ve got a potential lawsuit on your hands.
Selling your home with unpermitted work can be time-consuming and complicated, but it’s not uncommon. The biggest decisions around permitting should be done before the property is even listed.
Ultimately, it comes down to time and money: do you have the time to obtain permits before bringing your house to market, or can you afford the price reduction that often accompanies unpermitted work?
Selling a home without proper permitting can have major legal and financial repercussions. Not disclosing the unpermitted work to buyers can lead to you being sued down the road when they find out that there was unpermitted work done on the home while you owned it.
Even if you sell the house with unpermitted work that was done by the person who owned it before you, you can still be liable.
Selling Your Unpermitted House In As-Is Condition
Most homeowners will pass on buying a house with unpermitted work done on it. Can you really blame them? It’s pretty risky.
The issue with selling the house with unpermitted work (if someone is willing to buy it) is that you will most likely have to accept a lower offer. While you may not like hearing this, the buyer will have to invest their money into having the construction redone and pulling the permits for the work.
I know what you’re thinking. “I can just sell the house with unpermitted work. They will never find out.” Maybe they won’t, but is it worth the risk? You can be dragged into a lawsuit over selling a house with unpermitted work, which can cost you thousands in attorney fees and court costs. THEN, you have to go back and pay for the unpermitted work to be redone properly.
If you are going to sell your house with unpermitted work, you should disclose all of the work that has unpermitted work done on it upfront. For instance, if you have a finished basement that doesn’t have a permit, then you should disclose that the basement is finished, but does not have a permit.
Simply disclosing this information can potentially save you from being sued down the road (consult your local real estate attorney).
If you are selling your house with unpermitted work, pay 3 contractors to give you quotes on how much it would cost to redo the work with permits. You can use these quotes for negotiations later on. Most buyers will low ball you if you have unpermitted work and tell you “OMG this is going to cost me soooo much to fix.”
You’ll know exactly how much the value of the home will drop due to the renovations needed to get permits on the house.
Getting a Permit Before Selling the House
If you want to get the highest possible offer (even if that means dumping thousands into the house to get permits pulled), the having a new contractor fix the property and have permits pulled is the route to go.
But first, call your local building permit office and ask them if you can pull the permits yourself so that you can save some money. Depending on how large the renovations were, you might be able to have the permits done yourself. Once you have applied for the permit, the local building authorities will schedule a building inspector to come out and check out the work.
If there are major issues that need to be resolved, the inspectors will not provide you with a permit. They will give you a list of things that need to be fixed and permitted on the property.
Then you will have to hire a contractor to do all of this work for you.