How would you feel if you bought a house that was advertised as a having four bedrooms, three baths with a large recreation room and later discovered that technically it had only three legitimate bedrooms, two bathrooms and a basement?
This scenario is not far fetched. In neighborhoods with older homes, it’s common for properties to undergo several improvements over the years – and sometimes without the blessing of the local building department.
It’s easy to understand why a homeowner would decide to bypass the permit process. There are fees attached to building permits and time involved in waiting for building inspectors to show up. But, skirting permits can create a big headache if you ever intend to sell your home.
For instance, in most cases the buyer of your home will have to get a mortgage to close the sale. This means that the property is likely to be scrutinized by a property appraiser sent by the lender to confirm that the buyer isn’t overpaying.
Most appraisers look at the public record to confirm the number of bedrooms, bathrooms and square feet of living space. Granted, the public record is often inaccurate, particularly in areas of older homes that have been renovated over time.
But, some appraisers ask for verification that the improvements that are not reflected in the public records were, in fact, done with permit. If the sellers can’t substantiate that the work was done with permits, the appraiser might not give full value for the improvements. If the house doesn’t appraise for the sale price, the transaction could be in jeopardy.
HOUSE HUNTING TIP: Even if you don’t intend to sell now, you can enhance the value of your investment by making sure that your substantial renovations are done with building permits. Today’s value conscious buyers are likely to pay attention to this important detail.
However, buyers should not assume that an addition wasn’t done with building permits just because it doesn’t show up in the public record. Recently, Piedmont, Calif., homeowners put their home on the market. They had made a couple of additions to the property over the years that added 477 square feet of living space to the house.
Even though the sellers had obtained building permits before they did the renovations and their property had been reassessed to reflect the cost of the improvements, the public record did not include the extra 477 square feet in the total square footage calculation.
So the seller merely went to the county assessor’s office and filled out a form to correct the public record.
The sellers also had a recent appraisal of the property. The appraiser included the 477-square-foot addition in his overall square footage assessment. Appraisers will often include renovations in their square footage calculation even if that figure differs from the public record figure if the improvements were of similar quality to the rest of the house.
Some homeowners do quality renovations that withstand the test of time. Others hire slipshod contractors or handymen to make improvements that don’t hold up well. To ensure that you know what you’re getting, check the public record of any house you’re interested in buying. If you can’t find permits for significant work that has been done to the property, ask the sellers for copies of the building permits.
THE CLOSING: Also be aware that sometimes homeowners apply for building permits, but never receive a final sign off on the permit. This could mean that some work might not have been completed satisfactorily.
Dian Hymer is author of “House Hunting, The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books.