By: Paul Bianchina
It's an all too common situation. You find a perfect home for sale in an ideal neighborhood. It's been beautifully remodeled, and it has everything you've been searching for. Even the price is right. Something tells you it might be too good to be true, but you put in an offer anyway, and it's accepted.
You start doing all the paperwork, and sure enough you discover the catch that you always somehow suspected was there. The sellers did all of that remodeling work without any building permits.
So now you're faced with a dilemma. You really want this house. The sellers insist that all the work was done by licensed contractors, and that they have full documentation and photographs of all the work as it was being done.
The sellers also tell you that they're willing to allow any type of inspection on the home that you'd like -- except for one by the city.
They explain that they had a bad experience with a building inspector on a previous home, or that they have an ongoing feud with the city over their water bill, or they're protesting the fact that the city hasn't fixed the pothole on Main Street yet, or some other reason that they refuse to become involved with the local municipality.
Through all this, you still want the house. Red flags are waving, but you're trying to ignore them. After all, the remodeling really does look like it was done well, and you can certainly understand why the sellers would be protesting that big pothole, rather than trying to cover up bad workmanship on their own remodeling.
Perhaps you decide to go one step further and pay for inspections on the home, in the hope that someone is going to tell you that all is well, despite the lack of permits. You may even think that you can write some provisions into your sales contract that will offer some future protection for yourself.
Unfortunately, it's probably time to walk away from this "too good to be true deal."
A few hard realities
If the sellers are telling the truth about all of the work having been done by "licensed contractors," then they should be willing to provide you with a list of all of their names, so that's one of the first things you should ask for the sellers to provide. It's doubtful you'll get it, because in most states those contractors are risking hefty fines and even the loss of their licenses for doing remodeling work without a permit.
If the sellers are "open to any type of inspection," ask if they're willing to have all the walls opened up at their expense so your electrician and your plumber can thoroughly inspect the condition of the wiring and the pipes inside all of the concealed spaces.
This is what the city building inspectors that they were so anxious to avoid would have done. And this is what you, as the buyer, now have no access to. That's one of the big problems here: If you decide to buy this house, you have no idea what's hiding inside those walls.
If, at a later date, you have a fire or a water loss that's related to some defect that's been hidden somewhere by the seller or one of his contractors as part of this unpermitted work, your insurance company could deny all or part of your claim as a result.
I've personally been on jobs where that's happened. Can you even imagine having a loss in your home that runs into the tens or even the hundreds of thousands of dollars, and then finding out it's not covered because the previous owner didn't like city building inspectors?
Still can't live without that particular house? Then here's what you need to do to protect yourself:
• The sellers need to provide all necessary building permits for the remodeling work.
• If they can't do that, then they need to pay for a licensed structural engineer, a licensed electrician, a licensed plumber, and any other necessary professionals to inspect the work and issue letters stating that the structure currently meets or exceeds all current building codes. Using those letters, the sellers then need to contact the city building officials and obtain whatever the equivalent would be to a completed building permit.
• Once you have that paperwork, show it to your attorney and your homeowners insurance company to be certain it's sufficient protection, and be sure that a copy of it is recorded with the escrow company.