Real Estate Q - lack of permit

I've been keeping an eye out for a GRM-style house bargain out here which despite all the foreclosures seems to be fairly hard to find if you don't want a 2000sq ft tract home on a 1000 sq ft lot.

One place came up recently in our preferred location (up in the Tahoe basin rather than down here in the Carson Valley) which makes it a more desirable location and substantially closer to work for me, too. The only downside apart from the one mentioned below is that it's only got a double garage, but it's hard to find properties in our price range up there that have garages in the first place.

The only part that illuminates all the mental warning lights is that the ad for the house states that it contains some additional partially finished living space that's been built without permits and apparently not been recorded either. I take that as "no building inspector has knowingly been anywhere close to this space", either.

My understanding is that if I bought the house like that, the lack of permits and the - potentially "interesting" - workmanship that seems to go with that (especially out here) would become my insta-headache.

So, the big question is - how would one go about fixing this issue? I assume that at some point it would require to get whatever work was done inspected to make sure it meets code, but I have absolutely no idea if it would even be possible to even go through the permit process for something that probably would have required submission of the plans prior to building rather than after the fact.

Of course the only way I would be interested in this property at all is if the price was low enough to make up for the headache and additional expense. It's not low enough now but I'm expecting that the permit issue is rightly putting a ton of buyers off so once I figured out if it's even worth considering, it's got to be cheap enough to make fixing the issue worth my while.

What say the assembled multitude?

I would inspect it and then not worry about it.

Lack of permits doesn't mean anything is wrong with the house or the work. Permits are just to raise money for the city and make sure tax appraisals are higher.

So bigger house with lower taxes, what's not to like?

I cannot be such a big deal that house cannot be legally sold. Out here in California that are rules about additions that can negate the need for a permit. Like the homeowner being the builder and not doing 500$ worth a work a day.

Not built with a permit does not mean not built well. Heck out here on some of the new track homes, built to code and inspected is a joke. Stubs every 48 inches in places, electrical run like drunk apes and missing nails to hold down the tile roofs.

Fair enough, that's not a way I looked at this before. Being German I prefer my paperwork to be spotless .

I guess the concern is more that if by some fluke the extension gets "discovered", could the city basically force me to tear it down and/or leverage a huge fine?

Fortunately the house is on the NV side of the lake, if it was on the CA side I wouldn't even think about this. My interaction with government agencies over here in NV suggests that they're a little more realistic compared to CA. Surprise.

I would guess its not too big a deal, but if there is plumbing or electrical work that has been done poorly, first of all you have to live with it, but maybe more importantly, if the house floods or burns and the trouble is traced to uninspected work, your insurance company could use iot to deny the claim.

Having said that, I have a 1200 sq ft garage in my back yard the city doesn't know about.

I doubt they would make you tear it down. Worst case scenario they might make you pay taxes on the additional livable space.

Our house has the original garage turned into another finished room, its not included for our taxes and probably never will be..

I would visit the Building Dept and raise a hypothetical question. Tell them the facts, but not the location. They WILL find out sooner than later, . Might as well get the facts up front. Also gives you additional bargaining leverage.

Re the plumbing and electrical work - I don't have a problem redoing that or even getting it redone if I can get the house cheap enough. I haven't seen the house in person yet but from the pictures it looks like the work in the new part has stopped halfway through so the walls don't seem to be closed up fully.

I think the plan would be to open them up again, check electrical, plumbing and insulation, get fixed what's necessary and then close them up again, this time not with wood panelling.

In reply to cwh:

Very good point, thanks.

There's nothing that says the city WILL discover it at some time, but if they did all you have to say is "That's the way it was when I bought it"

I do much better work than the lazy SOBs who I occassionally pay to do work.

carguy123 wrote: I do much better work than the lazy SOBs who I occassionally pay to do work.

Same here, especially if I'm not in a hurry to finish the job. That's pretty much the way we're looking at house purchases - we know that whatever we need will need work so we're planning to slowly go through it room by room and doing the job right instead of being in a hurry.

Could there be issues of not being able to secure financing due to this lack of permits?
The house may be a great deal but if you have to pay cash for it, it would be hard for most to buy.

No financing won't care unless there is some strange level of work left undone. They'll just not give the unfinished part any value and go from there.

You don't have any responsibility for someone else's work done without a permit. They can't make you tear it down (unless it is sitting on someone else's property, or encroaches on the setbacks required by the zoning department).

HOWEVER, you said it is unfinished. You WILL be required to get a permit to finish the work. At that point, you will have a tough time proving which work you are responsible for, and which you are not. So, they could possibly hold you responsible by default. For example, if the wiring is not finished, you will be held responsible for ALL the wiring being completed properly.

No permit certainly does not mean bad workmanship. No correlation.

Sometimes, however, there are reasons a permit was not pulled that can make it difficult. For example, if the existing permit max's out the lot size, you probably could not add a bedroom (because it would require you enlarge the septic), or a 2nd floor bedroom with no window (which is illegal), etc. etc. Some of these potential reasons could come back to bite you (like, you thought it was a 4 BR, but can only sell it as a 3 BR).

The lack of a permit does not bother me. The seller admitting it does (because they may be disclosing it to cover their rear).

You can get a bargain if you know what is and is not required. You can get burned if you do not. This doesn't sound like an area you are experienced in.

Do you really want a legal "Gotcha!" later?

There is no way I'd get a permit to finish it.

carguy123 wrote: No financing won't care unless there is some strange level of work left undone. They'll just not give the unfinished part any value and go from there.

Not necessarily true. If the lender cannot accurately determine the value of their collateral they will not lend on the house. If the unpermitted work is in the form of additional square footage, this will become an issue. If an appraiser cannot find a "similar" comparable sale, with similar un-permitted additions the lender will not be able to document the value of the house...which equals loan denial.

I'm a mortgage loan officer and we're living and dying by appraisal issues these days. Unpermitted square footage is a major red flag for appraisers and lenders alike. Proceed with caution

In reply to jaredkuehn:

Carguy123 is a mortgage broker too.

Hey guys! Mortgage broker catfight (as he gets the popcorn!)

SVreX wrote: In reply to jaredkuehn: Carguy123 is a mortgage broker too. Hey guys! Mortgage broker catfight (as he gets the popcorn!)

Not saying Carguy123 is necessarily wrong. But to make a blanket statement saying that the lender won't care is a little mis-leading. If I were to proceed with this purchase, I'd do so knowing that un-permitted improvements could be an issue for financing and could also create problems upon resale...Just trying help out!

Hisssss!

I didn't make a blanket statement, I modified it with the proviso that "They'll just not give the unfinished part any value and go from there."

Now if the owner is trying to get value for that area over and above the value of the rest of the property then he'll run into problems.

Jared is right in that appraisal issues are the bane of everyone's existence. When you are no longer allowed to shop for an appraiser who knows the area, look for a more experienced appraiser, or even shop price you end up with some strange appraisals.

And when you aren't allowed to get a second appraisal or even contest the appraisal (unless you can prove incompetence on the part of the appraiser) it really does cost everyone money.

I hope you really got value out of your popcorn cause the fight wasn't all that thrilling.

You're right. It was cheap popcorn anyway.

As everybody knows, Miami-Dade county has a large immigrant population. Many own homes. Very few want to know what building permits are. Result is a very large number of un-permitted additions, etc. They WILL force removal of the addition there. And inspectors drive around looking. Coral Gables will demolish the entire structure and throw you and your wife and eldest child, in prison. OK, slight exaggeration, but inspectors there will, and do, look in windows to ensure approved colors are used and that you didn't put a bed in the garage. That is no exaggeration.

I can sorta understand no bed in the garage for safety reasons, but 'approved colors?' Not no but HELL no I would not live there.

Downtown Charleston SC is like that. All those quaint houses on The Battery? If you own one, the BAR (Board of Architectural Review) can and will tell you what to do with your house. Renovations? They send a rep by EVERY DAY to see what you are doing. Need to replace some interior wood? Not unless they say so. A bud who used to do a lot of that said rotten or termite infested trim was, in many cases, fixed with Bondo so the BAR didn't have to get involved. And that in many cases those houses stand only because the termites are holding hands.

They do take it to the extreme there. They have a palet of approved colors for anything that can be seen from the street. Want something different? File an appeal, pay money, wait. Or, find a corrupt official. Hey, after all, it IS Dade County!

Back to the OP's question: I know zilch about Nevada's laws on this. But the fact that the non permitted stuff is in the ad tells me 1)THEY think there's an issue and 2) that means yes it can be leverage to bring the price down.

Do your due diligence.

If it's possible to maybe pay cash for the house up front, then complete the repairs and have them inspected for code (or even remove them and do it your way), I would think this would make it a lot more palatable for the bank come mortgage time.

Think of it this way: in the event there's a default, do they want to be standing there holding the bag on a piece of property that's very hard to sell because there is no way to prove the additions/repairs are to code?