Buying an existing home can be exciting and scary at the same time. While you would hope the seller discloses everything there is to know about the home, that’s not always the case. One area they often cover-up, whether knowingly or unknowingly, is with unpermitted renovations. If the sellers did renovations themselves or even had a contractor do them without checking with the city first, it could leave you with unpleasant repercussions as the new owner.
Compare Offers from Several Mortgage Lenders.
Before you buy a home, make sure you specifically ask about any renovations the sellers completed on the home. If there are renovations, ask to see the proof of the final inspection by the city so that you know you won’t face any of the following consequences.
Fixing the Problem is Your Responsibility
Once you own the home, if there’s an issue with the renovations, they are your responsibility. In other words, you can’t go after the seller if the city comes down on you for unpermitted renovations. For example, if the city requires that you tear down the renovation and build it again up to code, you are responsible for the work and the costs. It’s not unheard of to have to completely take down a renovation and not do it again.
You May be Responsible for Penalties
If the city charges penalties for unpermitted renovations, you will be responsible for the charges. Again, even though you didn’t make the changes, you own the home. That’s all the city cares about – the owner of the home must pay the penalties and/or permit fees that were never paid in the first place.
You May Have Tax Consequences
If the unpermitted renovations affected the home’s value, you may be responsible for back taxes. Your county’s tax authority may determine when the changes were made and then charge the back or missed taxes accordingly. Not all renovations have any effect on the home’s value, but why take that chance? Back taxes could get very costly, especially if the county charges you a fee for missing the due date for those taxes.
Your Insurance May Not Cover Damages
If you suffer a loss in an area of the home that has unpermitted renovations, the insurance company may not cover the cost of the damages. Again, this is something you may not even know until the damage is done and you are facing financial consequences. This is why it’s so important to inquire about any renovations that were done so that you can make sure they are permitted and/or that insurance will cover any damages that occur to them.
Click to See the Latest Mortgage Rates.
How to Protect Yourself From Unpermitted Renovations
So how do you protect yourself from unpermitted renovations? The first line of defense is to straight out ask the seller about any renovations they did. Hopefully they are honest with you. If they tell you they did do renovations, ask for documentation showing the work along with the permit or approval by the city/county. If the seller doesn’t have these documents, do your own research with the city to make sure the improvements were approved.
You should also solicit the services of a professional inspector. This professional can usually tell rather quickly if something isn’t right. They have an eye for detail and can tell when something wasn’t done up to code. If they see a red flag, you should be asking more questions of the seller or canceling the sale and moving onto a home that doesn’t have unpermitted renovations.
The most important thing you can do is make sure all renovations were done with approval. Why take a risk? Not only are you at financial risk, but the integrity of the home could be at risk as well. You want to make a good investment, not one that will cost you more than you intended once it’s your home. Ask pointed questions and doing your own research is the best way to protect yourself in this situation.
Mortgage.info is your information portal for all things home, mortgage, and refinancing.