With the last decade, we have seen short sales, foreclosures, and flippers dominate. Times are a changin’ and it’s best to research a home completely before you jump blindly in purchasing the home of your dreams.
A lot of the foreclosures, short-sales and some retail homes were sold as-is, where-is…remember those phrases? One reason could have been because they had additions or renovations that were not properly permitted.
I’ve run into this many times with properties and wanted to share a few things BEFORE it’s too late.
As for the unpermitted work, there are several not-so-great things that can happen if you buy the place:
The responsibility to disclose the work will now fall on you when it comes time to sell again, unless you, too, try to discreetly sell as-is which will open up a different can of worms.
If the Code-Enforcement Department discovers the illegal construction, it may still require you to remedy it, whether that includes minor changes or even a partial tear-down, and pay for permits (and possible penalties).
If the Code-Enforcement people inform your taxing authority of the illegal addition after you buy the place, you may be assessed retroactively for back taxes based on the additional square footage and possibly interest and penalties. By the way, if there’s a disparity between the square footage on the tax-assessor rolls and the square footage of the house now, that’s a big red flag.
While permitted work is “grandfathered” after building codes get updated, code-enforcement officials may mandate that any illegal work be brought to current code. This could cost more than the permit would have originally.
Unpermitted additions often are not covered by homeowners insurance policies, so if a guest is injured in one of those two bedrooms, you might find yourself embroiled in a lawsuit if your insurer refuses to pay. Also, they may refuse to cover any part of the home that was not permitted properly.
While a relatively rare occurrence, mortgage companies have been known to call a loan for immediate payment if they can prove you knew about an illegal addition, reasoning that they don’t want to take a chance on exposing themselves to future liabilities.
If you, somehow, run afoul of your new neighbors, who may have been aware of the illegal work under the old owner, they just might “drop a dime” on you and report the unpermitted work.
Most likely, you won’t run across this as often as I have of late and no one wants to be liable in the future for something of which they were not aware.
Sellers – If you bought a home as-is, where-is and now ready to sell, give me a call. I know exactly what steps are required to get this corrected. In the long run, it will save you money, grief and a lot of headaches.