buying home with un permitted room addition

33 Replies

Hi, I am buying a home in southern california. This home has a bonus room that was converted into two bedrooms by constructing a wall in the middle with a door. There is no permit and also building codes were not considered. This is stated in the sellers disclosure which was not sent to me by my agent (by mistake). When i am asked to sign the disclosure i noticed this but i have release all contingencies alreaday and only few days left for the escrow closure. Is it ok to keep the unpermitted room as is. Is it still considered illegal if found even though i didnt make that construction. Appreiate any expert advice on this, thx.

I would look into a formal property inspection.

Thanks Andrew. Inspection did mention about the room. But it only points out to the different wall texture and states that it looks like an addition. There is nothing in the appraisal, the home is considered as 5 bedroom (including the additonal one) for the purpose of appraisal.

Are you paying cash? A lender's appraiser would have likely noticed an un-permitted room division. You'll likely not run into any problems until you re-sell or refinance. You would have to disclose on it your re-sale. And an appraiser might notice it when refinancing. Or if you tried to rent it to a Sec8 tenant (government subsidized housing), it will likely be noticed by an inspector.

You're free to live there with it the way it is. The work was un-permitted. It's not illegal as in committing a crime. You'd want to make sure it's structurally sound and that any elec. wiring is safe though.

Thanks Marie, your answer is very helpful. I am not paying cash, not sure how its not noted in the appraisal. I am planning to rent it out, will there be any problem renting it out (other than sec8 tenant)?

@Lenin Belangonda The biggest concern with non permitted additions is that they are not up to code. As Kristine Marie Poe stated, you will want to have someone inspect the electrical and structural soundness of the addition. If the listing agent knew that the addition wasn't permitted, they should have disclosed it in the listing agreement. If it wasn't disclosed and you just found out, it may make the contract voidable. You may also be able to get the price lowered. Talk to your agent.

Originally posted by @Lenin Belangonda :
Thanks Marie, your answer is very helpful. I am not paying cash, not sure how its not noted in the appraisal. I am planning to rent it out, will there be any problem renting it out (other than sec8 tenant)?

An appraiser not noticing the discrepancy between the assessor's bedroom count and the actual count seems like an oversight to me. But perhaps it's an oversight in your favor. I'd have no problem closing on it. If I was satisfied that the construction was sound and that the electrical was safe, I'd have no problem renting it out. Assuming the construction wasn't absolute hack work, you may be able to get the work permitted after the fact. It may or may not be worth the cost. Every time I've encountered unpermitted additions and structures, I've gotten rid of them (maybe half a dozen times). The quality of the work was never worth keeping, even though the additional square footage had value. Dealing with muni building inspectors and permitting fees hasn't been worth it to me. But for sure there are properties where the value of an addition or unpermitted construction is worth permitting after the fact.

I've noticed that when that kind of work slides through a purchase and loan, the next appraiser is likely not to call it out either.

Don't go calling the county and asking questions until you're prepared to deal with it (financially and time wise), by either bringing it up to code or putting it back the way it was. The counties love it when you call in to report your own unpermitted work. Easy citations, easy money. :)

Originally posted by @Karen Margrave :
@Lenin Belangonda The biggest concern with non permitted additions is that they are not up to code. As @K. Marie Poe stated, you will want to have someone inspect the electrical and structural soundness of the addition. If the listing agent knew that the addition wasn't permitted, they should have disclosed it in the listing agreement. If it wasn't disclosed and you just found out, it may make the contract voidable. You may also be able to get the price lowered. Talk to your agent.

I'm all about getting discounts in escrow when this kind of thing happens. If you try to sell me something and it's different than how it was represented, I'll use that to try to get a discount if I need one to make it work, or I'll walk. If I'm already getting in for a good price and I know there are back up buyers, I'll let it go. But I don't have a lender lined up and didn't pay for an appraisal or inspections. I not invested and and I don't "need" any property. Since the OP is getting a loan and the closing is days away, I'm guessing that a price change would kill the deal.

Thanks @Karen Margrave and @K. Marie Poe. Yes the closing is days away and the listing agent actually disclosed it. I didnt read it or sign it, so dont think i can get any discount at this time :(

I really appriciate your answers, i am new to this forum and already love the help i am getting. Thanks again.

when you say it wasn't forwarded to you "by mistake" what does that mean?

In my experience, the addition of the bedrooms by the non-permitted work may be removed from the appraisal and could then drop your appraisal amount. For example, if you create an addition that adds 400sq ft but is not permitted the appraiser will not use that sq footage nor that extra room count.

Kristine Marie Poe I agree, so close to closing I wouldn't rock the boat. It's lucky that the appraiser missed it and didn't dock the price.

Originally posted by @Shawn Thom :
when you say it wasn't forwarded to you "by mistake" what does that mean?

In my experience, the addition of the bedrooms by the non-permitted work may be removed from the appraisal and could then drop your appraisal amount. For example, if you create an addition that adds 400sq ft but is not permitted the appraiser will not use that sq footage nor that extra room count.

I'm not sure, but from what the OP described there appears to be only a room division issue, not an addition. So there would be no discrepancy in the square footage.

Originally posted by Kristine Marie Poe:

I'm not sure, but from what the OP described there appears to be only a room division issue, not an addition. So there would be no discrepancy in the square footage.

Correct, but comp'ing it as a 2 bedroom instead of a 4 (as an example) may affect the outcome of the appraisal therefore affecting his ability to get financing at a certain $$ amount.

Even though it was a written disclosure, I'm a little concerned that your agent didn't explicitly talk to you about it. It's not a petty detail. You likely purchased the property based on comps for 5 bedrooms and the sq. footage. When selling, that'll likely change.

It will come into play someday when you try to remodel the house, when it comes time to sell, or if a city inspector happens to drop by. As long as you're comfortable with that...

There are several issues with accepting it as it is. First of all many places require occupancy permits. And that unknown timing of Murphy showing up at the wrong time. If you do any permit work they could cite you. Faulty wiring could cause issues. This is not a big deal to deal with, but letting it slide is a gamble.

And I would not overlook the fact that it was not disclosed. Most states require disclosure of all known issues. I am not a lawyer but I don't see how they could hold you to it when they withheld this. If they try, call whoever enforces building codes there. Without clearing that AND providing you what you contracted for you then put them at liability. Try being nice if they let you, but demand that they deliver what you contracted for.And ... consider it a lesson learned.

It could be a very serious issue.

The municipality could require you to tear out the divider/addition.

The municipality could fine you, sometimes these fines are a daily fine.

Or the municipality could condemn the property and not allow you to use at all either as an owner occupant or as a rental. I know that is drastic, but there was a case in PA. where somebody built a house without a permit. That brand new house is still sitting there unoccupied 20 years later!

The room divider could come out in a rental inspection, a section 8 inspection, a complaint to codes by a tenant on some unrelated issue, a neighbor complaint maybe even about too many cars.....

Originally posted by @David Krulac :
It could be a very serious issue.

The municipality could require you to tear out the divider/addition.

The municipality could fine you, sometimes these fines are a daily fine.

Or the municipality could condemn the property and not allow you to use at all either as an owner occupant or as a rental. I know that is drastic, but there was a case in PA. where somebody built a house without a permit. That brand new house is still sitting there unoccupied 20 years later!

The room divider could come out in a rental inspection, a section 8 inspection, a complaint to codes by a tenant on some unrelated issue, a neighbor complaint maybe even about too many cars.....

David: give me the address of that house. I want to buy it!

@K. Marie

No you don't. The owner contractor even tried to use political pull to get the house occupied. He joined the party in power, donated money to that party, helped with fund raisers and even offered to let the county use his vacant house as a polling place gratis.

They still would not give him an occupancy permit, and he refuses to tear the house down, so its a stalemate. Besides the no permit issue, the contractor also never subdivide the land, so the unoccupied house is on a lot with another house, and zoning only permits one house per lot.

What would you do with this house if you could buy it?

I would only buy it if I could solve the problems, and at a price that works for me. That's what I do.

Sometimes I see stalemates like the one you describe where everyone sees a no and says no. Sometimes it takes a solution no one else thought of. Sometimes all it takes is new blood. Sometimes the owner has to die and the property has to go to tax sale. I like to get there before then.

@K. Marie

We've known each other for many years, and you know I like you like a challenge. I've had some that took years to resolve, but worked out eventually. Other times though the amount of time and effort, and money just doesn't make it seem worth while.

There's something to be said for niche markets, the smaller the niche the less competition.

OTOH low hanging fruit is ever so tempting.

WOW! David, please tell us how you were able to get all that information re the owner.I am always looking for ways to improve my due diligent inspections. Regards-Foster

Thank you all for your response. In my case the seller disclosed it and my agent says he forwarded it to me. I am not sure if he is telling the truth but even if he is as @Peter K. pointed out he should have explicitly talked about it. But since its not sellers fault i really dont know how to get them pay for it. Buyer agents are supposed to be helping buyers but its really hard to find such agent, all they want is to close the deal and get the money.

And appraiser - not really sure if it was a honest mistake. The comparables taken are all much nicer newer houses. Some of the houses are 12 years newer but no credit given towards the age of the house. But this house got a 5k value added for the 5th bedroom. So it looked like the intention is to appriase it for the loan.

Your description of the fifth bedroom leaves me with a question. Is there a second door? Or do you go through a "bedroom" to get to a "bedroom"? You can't count a room with no exterior egress as a bedroom, nor can you count both rooms as bedrooms if a room must be used as a "hallway" to get to another room. And if the listing and/or appraiser and/or "your agent" ignored that ... I would consider using a potential complaint against their licenses as a tactic to get their cooperation. Just realize if you do it will be a bridge burned. But I am not sure that is a relationship worth maintaining when their integrity is at question.

Wow, does one really have to get a permit in the Soviet Republic of California to simply add a non-load-bearing wall in the middle of a room?

Most of us on BP are very well intentioned - here, there was no work performed outside of the box, meaning no addition and whatever work was done, dividing the room into 2, was done without a permit. This is pretty typical all over the US and isn't much of an issue at all. While couched in "heath, safety & welfare" issues, permitting is really about revenue for the local government. It's very unlikely that this is ever going to cause you any problems unless the room was part of an illegal addition.

If the numbers work, buy the house and good luck with it. I wouldn't contact the municipality at all...silence is golden sometimes. The case that @David Krulac mentions happens quite a bit and it's usually a political type deal or someone who just wants to thumb their nose at the laws....do that with new construction and you're looking a fines, no occupancy permits and worst case, having to pay to demolish the whole thing and start over again. I saw this happen 20 years ago in a small town...they made the owner of the unpermitted building start all over again by completely demolishing the entire structure. With most things, you'll get more with honey than you do vinegar!

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