Why do some investors allow unpermitted work?

Real Estate Agent · Philadelphia · Member since 2023 · 11 posts · 12 votes

There are obvious benefits to acquiring properties that have permitted work, but I want to see if anyone can explain why some folks allow unpermitted work. My curiosity includes how timeframes are affected, the listing price of the home, quality of work etc.

Anyone have any insight?

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Cody L.

Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes

Personally I don't care of someone got permits to do something. If it's done right, I don't need the government having been involved. Plus, I see all the reasons someone wouldn't want to bother with a permit so I'm not going to lose sleep over their decision.

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Kevin Sobilo
Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
2y
@Sophia Boro, I think in many (probably smaller) municipalities that there are not good records with building permits, building inspections, etc. Also, often the details gathered to pull permits of often lacking. So, even if they had good records they wouldn't have a lot of details needed to enforce.
So, I think the lack of repercussions later on is probably the reason why. Just my perception.
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Sophia BoroPro Member
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Real Estate Agent · Philadelphia · Member since 2023 · 11 posts · 12 votes
2y
@Kevin Sobilo That makes sense! Do you think there is any difference in the quality of unpermitted work vs. permitted?
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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
Quote from @Sophia Boro:

There are obvious benefits to acquiring properties that have permitted work, but I want to see if anyone can explain why some folks allow unpermitted work. My curiosity includes how timeframes are affected, the listing price of the home, quality of work etc.

Anyone have any insight?

Two reasons:
1. They are inexperienced and do not know what requires a permit
2. They are cheap.
Permitted works costs more than unpermitted work and they will get quotes and be sold by the tradesperson that you do not need to have someone licensed do this, this is easy work and the permit is meant for more complex work....
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Sophia BoroPro Member
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Real Estate Agent · Philadelphia · Member since 2023 · 11 posts · 12 votes
2y
Thanks! @Chris Seveney
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Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
2y
Some jurisdictions are strict on permits, and some don't care at all.
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Sophia BoroPro Member
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Real Estate Agent · Philadelphia · Member since 2023 · 11 posts · 12 votes
2y
@Russell Brazil I can understand why someone wouldn't prioritize it if their jurisdiction doesn't. Thanks for your reply!
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Kevin S.
Member since 2024 · 400 posts · 240 votes
2y
Quote from @Sophia Boro:

There are obvious benefits to acquiring properties that have permitted work, but I want to see if anyone can explain why some folks allow unpermitted work. My curiosity includes how timeframes are affected, the listing price of the home, quality of work etc.

Anyone have any insight?

I can tell you as the end user why I did it. TIME. Re modelled almost the entire house before we moved in. The cost was the cost and the contractor let me chose to permit or not to permit. We choose to skip permit only because we wanted to move in before the holidays! Choosing permit route would have caused delay. I don't think the quality of work would have been different with permitting. Would I have preferred to go the permitting route? Yes. Sometimes the reason(s) lies outside of rational or logic. As for the quality, it depends on company. The contractor we used had renovated bigger homes than ours. We took the chance. I think if a contractor 'suggest' to skip permit then I would stay away. The renovations was not ADU type work just to be clear.
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Sophia BoroPro Member
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Real Estate Agent · Philadelphia · Member since 2023 · 11 posts · 12 votes
2y
@Kevin S. Thanks for sharing your experience! Recognizing the red flags with Contractors is a must-have skill!
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Kevin S.
Member since 2024 · 400 posts · 240 votes
2y
Quote from @Sophia Boro:

@Kevin S. Thanks for sharing your experience! Recognizing the red flags with Contractors is a must-have skill!

You are welcome. In our case the contractor said that it's better for home owner to get permit but because we wanted to move in by certain date he suggested we may have to skip it. It was our choice. Now if a contractor suggest skipping permit right off the bat, it may be a bad sign IMO. Regardless, it's still a risk without permit.
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Kevin Sobilo
Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
2y
Quote from @Sophia Boro:

@Kevin Sobilo That makes sense! Do you think there is any difference in the quality of unpermitted work vs. permitted?

In many cases there won't be much/any difference in the quality of work in my experience, BUT I guess for someone who doesn't know what they are paying for that is a much riskier proposition.
Also, in a lot of places the building inspections are insufficient. The permits are as more about a revenue source than serving a useful purpose in some places.
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Cody L.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
2y
Personally I don't care of someone got permits to do something. If it's done right, I don't need the government having been involved. Plus, I see all the reasons someone wouldn't want to bother with a permit so I'm not going to lose sleep over their decision.
6 Reply
Kevin S.
Member since 2024 · 400 posts · 240 votes
2y
Quote from @Cody L.:

Personally I don't care of someone got permits to do something. If it's done right, I don't need the government having been involved. Plus, I see all the reasons someone wouldn't want to bother with a permit so I'm not going to lose sleep over their decision.

Permitting has to do with me having ZERO knowledge in 'construction' and not knowing if the contractor is doing something correctly or not. I depend on city inspectors to tell me if something is not done right. Government involvement in this case is actually favored, at least for me. Many other things, not so much.
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Dan Thomas
Rental Property Investor · Bow, NH · Member since 2016 · 216 posts · 185 votes
2y
@Kevin S.
Yeah I mean, maybe... in my experience permitting has everything to do with local governments being able to increase your taxes for each and every improvement. I have seen literally several different "inspectors" asking contractors about how to interpret building codes. I'm not going to rely on those knuckle heads to ensure anything, other than that my taxes will increase because of what they are looking at.
I invest in two different towns that don't have a permitting process and direct you to the state. The state tells you to comply with town requirements.....you literally couldn't get a permit if you wanted one.
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Henry T.
Member since 2022 · 1k+ posts · 1k+ votes
2y
If the work is done properly and up to code I don't think it's a big deal. But you have to know what's up to code and proper.
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Jill F.
Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
2y
Most of the plumbing companies around here will look at you like you've lost your mind if ask for permitted work on a property where you already have occupancy.
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James MurphyPro Member
Member since 2024 · 18 posts · 16 votes
2y
Permits are intended to protect the consumer. Most consumers can't tell if a contractor did the work correctly or not. Contractors normally add the cost of the permitting to the consumer and contractors may charge for the incremental time that it takes to wait for and work with the permit inspector. Some insurance companies may deny a claim if they find out that work was done without any permits that are legally required. Any permits that are opened should be appropriately completed and closed off. Any open/unresolved permits may be considered a cloud on title in some locations which will cause problems with sales or deed transfers. These comments are not legal advice. Good luck!
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Stuart UdisPro Member
Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
2y
Each municipality has different licensing and permitting requirements and "permitted work" can mean a wide spectrum of scopes from replacing a hot water heater to building an addition, so it's difficult to group all improvements together in the same category. Both carry risks (obviously greater risks associated with the larger scopes of work completed without permits). You tend to see these short cuts taken more frequently in lower valued real estate where it can be difficult to make the numbers pencil if you are following all licensing and permitting requirements. This of course is municipality specific but that's the general theme I observe. How easy it is to get away without pulling permits is also circumstantial and dependent the municipality. Keep in mind whether you are the investor performing work without permits or you acquired a property where the improvements were not properly permitted, you are opening the door to greater liability and less avenues to hold those responsible for construction defects accountable. You can also experience exclusions in your own insurance coverage, particularly if you are performing the work without correct licensing and permits.
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Lynn McGeein
Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes
2y
@Sophia Boro for your own home where you plan to stay a while, that’s your call for the safety of you, your family and guests, especially if you personally knew the quality level of the contractor. But for investment properties, I’d feel that would open us up to way too much liability that insurance likely wouldn’t have to cover if a tenant or guest was injured where a permit was required but not obtained.
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Jeremy Horton
Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
2y
Depends what it's for - if we're adding square footage or something that needs to go on the deed then yes we'll do permits and an inspection
Generally, if I know the contractor/sub does good work, I don't worry about a permit and inspection. It generally just complicates things. It's going to be more expensive if I have to get someone different, then I have to file to get an inspection and all that - it's basically a bunch of unnecessary BS.
I usually just say "it was like that when I bought the place" whether I added it or not
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Matthew Paul
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
2y
Permits and fees are revenue for local governments . Scotus just handed down a 9 to 0 ruling.
https://www.scotusblog.com/2024/04/court-rules-for-property-...
In my county you need a permit to change a wax ring on a toilet . change an electrical switch or outlet .
I have had to advise customers that the small addition to their house , when pulling a permit will trigger the inspector to make them add fire sprinklers to the whole house , hard wired smoke alarms , upgraded electrical panel , plant 15 trees . All done the upgrades to other things were more expensive than the addition .
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Kevin Sobilo
Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
2y
Quote from @Matthew Paul:

Permits and fees are revenue for local governments . Scotus just handed down a 9 to 0 ruling.
https://www.scotusblog.com/2024/04/court-rules-for-property-...
In my county you need a permit to change a wax ring on a toilet . change an electrical switch or outlet .
I have had to advise customers that the small addition to their house , when pulling a permit will trigger the inspector to make them add fire sprinklers to the whole house , hard wired smoke alarms , upgraded electrical panel , plant 15 trees . All done the upgrades to other things were more expensive than the addition .
That ruling was interesting, but still leaves the issue unresolved. I believe the case now heads back to lower courts again! The government needs to justify their fee now. Theoretically if they can justify the fee they were charging then the fee could still stand, but more likely they cannot and will have to reduce the fee substantially.

In my state County/Municipal governments are only allowed to charge fees to cover the work they are doing. This has come into play as one local city was charging $150 for rental inspections while surrounding communities were charging $50. Someone eventually pushed back and found they were collecting WAY WAY more in revenue than the budget for the whole department. They quickly reduced the fees because they knew they would lose the court case.

Those last items are strange sounding to me. My experience is that generally, if you are not doing work on a portion of the house that you don't need to bring that portion up to current building codes.
So, for example, adding an addition would require hard-wired smoke detectors in the addition but not in the main house.
I suspect that people may get different experiences with this issue in different markets.
The only time I can think of additional work being required in my market as you suggest is that one city requires sprinklers for 3+ unit houses. So, if you take a 2 unit and add a 3rd unit, then a sprinkler system is required, but you are changing the use of the property by adding a unit.
1 Reply
Joe R.
Investor · Cape Coral, FL · Member since 2017 · 39 posts · 35 votes
2y
Quote from @Sophia Boro:

There are obvious benefits to acquiring properties that have permitted work, but I want to see if anyone can explain why some folks allow unpermitted work. My curiosity includes how timeframes are affected, the listing price of the home, quality of work etc.

Anyone have any insight?
Sophia, There is uneven and varying building code by each state, along with differing compliance stances and enforcement for permitting.

I recently installed a high efficiency hot water heater and furnace in a single family home in Western PA, I called the building inspector to ask what permits I needed, and he could care less about permitting for it. If I did the same job in Western MA, and they caught me doing it without permits, there would be a stop work order on the job. In Florida, if you're an unlicensed contractor, they treat unpermitted work like a felony, its no joke, mugshot and all.

I think some investors will try to skirt the building inspectors and not permit/strategically permit because of the perceived hassle, cost, and added timeline of dealing with the local building department.

When I build a new home in SW FL, the permits costs THOUSANDS of dollars. Then I pay taxes on the home, and assessments, etc. It takes the Cities down there 2-4 months just to review my permit package and approve it. Its a new home, I have to do it, and wouldn't do it any other way. Just know, its not all roses dealing with local building departments, their changing whims, and the cost/headaches of dealing with different building inspector personalities.

If you permit for a large job on a renovation, just know, your tax valuation will be assessed based on any new work performed. So if you put in say a chef's dream kitchen that's valued at $100K, guess what, you just added this newly assessed value to your tax bill every year.

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Alacia Mahnken
Realtor · Tampa, FL · Member since 2020 · 41 posts · 15 votes
2y
Quote from @Sophia Boro:

There are obvious benefits to acquiring properties that have permitted work, but I want to see if anyone can explain why some folks allow unpermitted work. My curiosity includes how timeframes are affected, the listing price of the home, quality of work etc.

Anyone have any insight?
I am uncertain if you are wondering why people would buy property with (known) unpermitted work or if you are asking why they would choose to not permit work they do after they buy the property.

If it's the former, then I assume the purchase price reflects a discount great enough to overcome the headache of getting retroactive permits. This would mean that they have also done their due diligence in knowing it could get permitted by having a GC and/or inspector come out and look at the property to make sure it is up to code. In some cases, the price may justify redoing the work up to code.

If it's the latter, then I believe that was answered above. Permitting takes time and time is money. You can get unpermitted work for much cheaper through specialty subcontractors that are unlicensed (usually because of immigration status). Their work can be quality work, or it can look like quality work but not meet code, you roll the dice. We haven't even touched on the safety and liability concerns. This is where a licensed GC who will pull permits pays for itself in peace of mind alone.
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Sophia BoroPro Member
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Real Estate Agent · Philadelphia · Member since 2023 · 11 posts · 12 votes
2y
@Alacia Mahnken I'm here for all insight! Thank you for your input.
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Sophia BoroPro Member
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Real Estate Agent · Philadelphia · Member since 2023 · 11 posts · 12 votes
2y
@Joe R.WOW! I didn't know that about the taxes. I will be a "forever student" of real estate.
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