OPEN building permits can cause problems for unsuspecting buyers and sellers

A few years ago I represented a buyer client that wanted to purchase a townhouse.  The townhouse was several years old and had gone through a number of owners.   A home inspection was conducted as a matter of course and the inspector pointed out that some of the electrical work in the “finished basement” was not quite right.  Several outlets were not located where they should have been.  The inspector suggested that the buyer inquire whether county permits were acquired or if any were still “open”.   It turned out that a previous owner had finished the basement as a DIY project and had applied for the required permits but failed to get a final inspection of the work and close the permit.  The current owner was required to get the work inspected by the county building inspector which resulted in a “punch list” to the tune of $5000 to bring the work up to code!  They were lucky.  If there had been a fire and the insurance company discovered un-approved and un-inspected electrical work they could have denied any fire damage claim.

Sandy Gadow wrote on this subject in a recent Washington Post article.  “Buyers usually have no reason to suspect that an outstanding permit exists in a home they intend to purchase.  After all, repair or remodel work may not be obvious during a visual inspection of the property and standard purchase contracts often do not include a contingency clause for verification of open permits. ”

First-time home buyers are especially vulnerable to the existence of open permits.  They usually don’t have the experience of dealing with county building permit requirements and may not fully understand their importance.  This is when a real estate professional really earns their money and can guide the new home buyer through an increasingly complex transaction.

When taking a listing many real estate agents will ask sellers if they are aware of any open permits.  They’ll then ask if any upgrades or changes have been made since the house was built that might have required a building permit.

Buyers can also check with the local building department to conduct a permit history on the property to reveal all permits and their status.

There are many reasons why a previous owner failed to obtain a permit: ignorance is a common excuse as well as avoidance of paying fees and additional taxes.  Nevertheless, a wise home buyer will make the necessary inquiries and insist that the owner/seller obtain all the required permits and ensure that they are all properly closed by the local authority.

Work done without a permit or a closed inspection can cause problems for the new home owner.  According to Sandy, “If no permit was filed the new owner may be liable for a fine.  And if the work is found to not be up to code, the new owner will be required to fix the problem,  bring the alteration up to standard and get a final inspection.”

A word to the wise.

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