In almost every municipality, construction permits are required before most work can begin when building or renovating a house. However, many people who remodel the interior of their homes as DIY projects fail to obtain permits beforehand, which can pose a significant problem to buyers who want to purchase those homes. Here's what can happen if you attempt to sell a home that has had unpermitted improvements done and how you can improve your chances of finding a buyer.
Pitfalls of trying to close on a home that has unpermitted improvements
When selling a house, there is a lot of leg work involved before and during the closing process. Some of this legwork can uncover the fact that unpermitted work had been done during DIY remodeling projects, which can make closing impossible or close to it. Here's how.
- The appraisal report will not match the tax assessment. The appraisal report will list the features of the home and the approximate value of the home based on the features it has and the condition it is in. This appraisal is then sent to the tax assessment office, where staff members will compare the appraisal with the latest tax assessment. If various improvements are not included in the previous tax assessment, the tax assessor will raise the taxes accordingly and, quite possibly, want back taxes from the seller on the new appraised value.
- The homeowners insurance policy may not cover the unpermitted work. Another thing that can happen is that the homeowners insurance company may not include the work that was done without obtaining the necessary permits beforehand. However, if the unpermitted work involved extensive remodeling that included plumbing and/or electrical wiring, the buyer may have an extremely difficult time finding a homeowner's insurance company to insure the home. Without homeowner's insurance, the buyer will not be able to obtain a mortgage.
As you can see, it can be difficult for someone to buy your house if you or a previous homeowner had any home improvements and renovations done without obtaining the necessary permits, particularly regarding electrical work, plumbing, and any changes to supporting structures of the home.
Ways you can remedy the situation before closing
If you have yet to do any remodeling but plan on doing some before putting your house on the real estate market, obtain permits before having the remodeling done and hire a home remodeling contractor instead of doing the improvements yourself. That way, you can rest assured that the necessary procedures are implemented that will make selling your home easier. Also, the experienced work of a remodeling contractor will help you get top dollar when you sell your house.
If you have already had some unpermitted remodeling done, it is crucial that you contact the local building code enforcement office as soon as possible. Explain the situation and ask them what you can do to improve the chances of a buyer being able to purchase your home without any ramifications to them or to you. In most areas, you may be required to do one of two things:
- pay a penalty, have the home thoroughly inspected to determine if it is up to code, and make any necessary repairs prior to closing
- rip out the improvements, obtain permits, and hire an interior remodeling contractor to bring the house up to code
Be absolutely sure to obtain all of the necessary permits and to have the home inspected by the building code enforcement officer after renovations are done. The closing process will go more efficiently, and you'll likely find more buyers who will want to compete with each other to buy your newly improved and fully permitted house.