Buying house with unpermitted addition?

Question

House is listed as 1,300sf 2 bed, 1 bath but the description talks about the 900 square foot addition, which is:

-A MIL apartment with full kitchen, living room, dining room, laundry room, and full bath, with separate entry.

-A single car garage converted to a bedroom, with it's own full bath and walk in closet.

The work LOOKS professionally done, but I suspect the additional square footage is not listed in the details, just the description verbiage, because it is unpermitted. So what's the likely scenario buying a house like this and what is the worst case scenario?

I don't think it would be an issue for me to live there or rent it out, but if I try to get it permitted and they want everything redone and it costs a ton of $$$, it could be an issue for me when I sell? Even then, I think for the price the house is worth just the permitted square footage. The MIL apartment, (which again, is totally self contained, even have their own laundry and separate entry) seems like a bonus to me, and judging by the look of it, it seems like I have a good chance of passing inspection with only minor hassle, if any.

Russell Brazil · Answer

The real question here if the work is unpermitted is how your local jurisdiction responds to unpermitted work. Some jurisdictions dont care at all, some will grandfather it in, some will not allow it to be sold, some may actually make you tear it down.

Put a call into the local building or housing inspector and ask them how it is handled in that jurisdiction.  This can not only change from state to state, but county to county and city to city.

Jack B. · Answer

@Russell Brazil

Good point. I went through this ONCE before, and called the county inspectors office and they were very understanding, (it was for an unpermitted partial garage conversion). I ended up not going through with the house not because of that though, at least from what I recall.

Jack B. · Answer

@Lynette Braun

That's good advice thank you! I asked my agent to put a clause in there that I want the unpermitted stuff to get inspected by the city before I close escrow. The home inspector I usually use is pretty good, he uses thermal imaging to see things the NAKED eye cannot see, plus he is a former home builder, so he can give me a pretty good idea of how bad it is. Turns out the guy who is selling the place is a licensed contractor. Assuming he did the work himself, it should be OK, but the city inspection clause was a good call, thank you.

Lynette Braun · Answer

Hi Jack!

There are two separate things you're considering here: Whether the additions are permitted and whether or not they are up to code. Check with Realtor in your area about local taxes. But here is California, property tax is calculated from permitted square footage. Leaving that area un-permitted would probably reduce your annual taxes. When you go to resell the property, some buyers may avoid or want to get a discount because the un-permitted area, so keep that in mind. But that's also the same great deal you enjoying now! :) Request a building inspection before you fully fund escrow. An inspector can give you a better idea of any repairs that may need to be done. If they are significant or something that the seller didn't disclose, you can renegotiate with the seller.  If it seems like it would be a good fit for your investment plan, go for it! Just do your due diligence in escrow. I included a link to a video I made about what kinds of due diligence you can do before going into escrow, linked below. Happy investing!

https://www.youtube.com/watch?v=n_7bzGnWaBM