Help, served with Building Code Violation in Sacramento

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Help, served with Building Code Violation in Sacramento

Jason A.
Sacramento, CA · Member since 2011 · 17 posts · 1 vote

We bought a foreclosure in 2008 in Sacramento County that had a large addition and we didn't check for permits. I know, I've learned a valuable lesson.

We were trying to refinance the property and for whatever reason the appraiser called the county and the county sent out a building inspector.

I'm completely new to the permit process and building codes, but I suspect that the addition was not built to code.

I'm trying to understand my options, but none of them sound particularly great.

I need to find a contractor to get an estimate to either demolish the structure and reduce my income producing property (5/3) down to a 3/1 which will generate rental income slightly less than the mortgage, taxes and insurance. Or bring the addition to code which I assume will mean demolish and rebuild. I'm not sure how much that might cost.

Any guesses for low end features for 800 sqft, 2 bedrooms, 2 bathrooms, family room? Any recommendations for a Sacramento contractor?

The other option we are considering is foreclosure and just walking away completely. We have about $22,000 invested in the property. Does anybody know how foreclosure might work on a house that has building code violations? Or any suggestions on how to deal with the county if we ultimately want to foreclose? I'm assuming I just stop making mortgage payments and keep the renter in as long as I can to try and recoup my $22,000.

Any recommendations for a real estate and/or foreclosure attorney that could help me?

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Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
14y

I suggest you get with the inspector and see which way is best and a contract who is capable of bringing it into compliance. Most issues can be brought into complaince if it's not a totally a dangerous building.

If you do decide to walk I strongly advise you not to keep rents and not pay the mortgage. There have been prosecutions for such theft in Cali.

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    14y

    I suggest you get with the inspector and see which way is best and a contract who is capable of bringing it into compliance. Most issues can be brought into complaince if it's not a totally a dangerous building.

    If you do decide to walk I strongly advise you not to keep rents and not pay the mortgage. There have been prosecutions for such theft in Cali.

    1Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    14y

    If the addition is close to code, you shouldn't have to demolish it. An inspector may want you to open up walls and dig up slabs to have a look. Then you'll have to make repairs to correct any issues and fix the damage. See my tale of resolving this sort of problems here.

    Have they given you any indication of what the problems are and what they want you to do to correct them?

    While you wouldn't be the first person to stop paying the mortgage and keep collecting the rent, that's "rent skimming". Illegal in CA for the first year after you own the property but, apparently, not after that.

    Is your loan recourse? Home loans in CA are generally non-recourse. That means the lender can't come after you for any shortage, they can only take the house. But if you have an investor loan, it may be recourse.

    1Reply
  • Uwe K.
    Milwaukee, WI · Member since 2009 · 203 posts · 50 votes
    14y

    I would first listen to what the inspector has to say. Sometimes, if you work with them and/or try your best, they might let go of some things that are not that important, or a half-fix is accepted.

    In regards to walking away: I have a pretty strong ethical opinion here. You bought it, you did or did not do your due diligence, and you have to live with the results. Unless you are in some financial distress (and I am not simply talking about a business deal that went the wrong way), walking away from the mortgage is an irresponsible and unethical way do deal with the fact that you made a bad investment. That is no different from people who spend money recklessly and then just say "I can always file for bankruptcy". Not as bad as people who walk away just because they are underwater, but quite up there. These people deserve everything on earth that can happen, including never being able to get a mortgage again, 30% credit card rates, nobody rents to them, and so on... Sorry for the rant, but every business is tough, and you have to deal with the risks if you want the rewards. That's why you get the risk premiums / price discounts with foreclosures.

    That is besides the fact trying to suck every penny of rent out while not paying the mortgage sounds like it is at least at times unlawful. I also know in my state you have to disclose existing code violations to the tenants, potentially reducing the rent amount and the tenant pool. Or if it is considered uninhabitable (which you haven't mentioned), then renting it is plain illegal in probably every state.

    1Reply
  • Alan Mackenthun
    Rental Property Investor · Englewood FL & Prior Lake, MN · Member since 2012 · 107 posts · 33 votes
    14y

    I'm with Uwe. I guess that's why I've never been comfortable out in la la land. An admitted mistake on your own part is no excuse to walk away from a property and stick the lender with it. Get to work and clean up your mess. It may not be fun, but you can work through it and you'll learn the right lessons from this experience. Learning the ins and outs of foreclosures is something I don't ever intend to learn (at least from the receiving end).

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  • Alex H.
    Electrician · Oakley, CA · Member since 2012 · 12 posts · 1 vote
    14y

    what, specifically, is the violation? If its just a unpermitted addition, probably not a huge deal as stated. If its just a hack job or violating setback regs you may have some more serious issues.

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  • Karen MargraveBusiness Member
    Moderator
    Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
    14y

    Have a contractor give you a bid to do the work to bring it up to code. You don't state what the violations are, therefore; we have no idea of the cost. An attorney probably would cost more than the repairs. You can also act as your own contractor, apply for and obtain permits, hire subs needed to do the work to bring to code. However; if you aren't capablle of doing that.... don't, as you'll end up hiring a contractor in the end anyway!

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  • James H.
    Investor · Fort Worth, TX · Member since 2011 · 1k+ posts · 450 votes
    14y

    I just want to echo talking to the code officer first. Be friendly and come across as having every intent to do things correctly and honestly. I can only imagine all the confrontational conversations and arguements code officers have on a daily basis.

    As far as walking away, you just need to do what is in your best financial interest to do. Evaluate the pros and cons of the outcomes. Last time I checked, I pay interest on my loans becuase there is risk associated with lending me money. When I got married, I signed a covenent. When I took out a mortgage, I signed a contract. Contracts and the laws that bind them exist specifically for the purpose of compelling our economy forward. They are not moral enforcements. Just becuase your business is real estate does not mean you are an iimmoral person if you cut your losses just like any other business would have to lay people off, break their leases, give fleet vehicles back to the lender, etc, etc, etc.

    1Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    14y

    "We were trying to refinance the property and for whatever reason the appraiser called the county and the county sent out a building inspector."

    Probably because the heated and cooled sq ft didn't match up.The appraiser has to explain away any variation in their report.

    If you are nice with the inspector they will try to help and understand you are in a bad situation.If you unload on them because you were duped by the seller then they will throw the book at you.

    Think of this.Everyday they get people mad at them.When you come along and appreciate what they do and are nice it goes a really long way.Even if they are nasty to you be nice.They might have had a bad day and they will feel guilty later on and want to help you.

    I always try to live by my dad's saying.He told me to try to always "be nice and you will usually get more results with honey than vinegar".

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  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    14y

    The appraiser called the county, probably not to report on you, but to see if there was a permit pulled for the additional baths/bedrooms and square footage. 800 square feet and two additional baths is kind of major. The appraiser is working with the county assessor's info re size and rooms and it obviously did not match the house. I called the county on a house I had bought with an enclosed patio. I was pretty sure it wasn't permitted because both bathrooms had only windows for venting, and both windows vented to the patio. There wasn't a permit, so I demo-ed it. Unfortunately, I had essentially called in on myself so they sent out an inspector. The enclosure was gone when they inspected but I still got charged a site visit fee.

    Start with finding out what the inspector has to say. Your county has a process to permit something that has already been built. Happens every day. Depending on the skills and attention of whoever built the addition, it may be as simple as inspections and some minor repairs to get it permitted. It may be a major overhaul not worth doing if it was a hack job.

    Are the basics there? Is there a foundation? Do the bedrooms have egress windows and are the baths vented or have windows? What's the electrical situation in the addition look like? Regardless, start with the inspector and find out what they want. IMO, you're a ways away from deciding to let it go to foreclosure.

    0Reply
  • Jason A.
    OP
    Sacramento, CA · Member since 2011 · 17 posts · 1 vote
    14y

    Sorry for the delay in response. I met with a contractor who inspected the addition and confirmed that it does not appear to be to code (roof slope, foundation, etc). The next step is for him to talk with county and see if there is something that we can do for them to meet us halfway. If not, his estimate for demo was beyond what we can pay. I'm hopeful we'll find some common ground with the County, but at this point foreclosure is looking more real.

    0Reply
  • John Bowen
    Real Estate Investor · League City, TX · Member since 2012 · 54 posts · 9 votes
    14y

    A couple of the projects we have done required major permitted rehabs or remodel. We found that getting the inspector there before we even started and explaining our situation that they frequently were very helpfull in explaining exactly what was needed and what could be grandfathered. They seemed a bit understanding that you bought this dream and something was done wrong before hand that you are now stuck with.

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  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    14y

    Jason: a lot of people here, some of us in CA, suggested that you start with the inspector, so I'm curious why you started with a contractor who says that it doesn't "appear" to be built to code. Why waste time with someone's opinion or quote when you don't know what the county wants? County inspectors have guidelines for minimum code compliance and can tell you what they need to permit the addition after the fact. The contractor can only be guessing until they work with the inspector.

    0Reply
  • Nick Seevers
    Investor · Sacramento, CA · Member since 2011 · 11 posts · 0 votes
    14y

    Was wondering if you got this fixed or what ended up happening?

    0Reply
  • Jason A.
    OP
    Sacramento, CA · Member since 2011 · 17 posts · 1 vote
    14y

    We've been working with a contractor and just now got somewhat of a bid. It would be $25k to remove the addition and approximately $80k to bring it to code. We're still evaluating our options including foreclosure.

    0Reply
  • Shane Woods
    Real Estate Agent · Weatherford, TX · Member since 2011 · 726 posts · 284 votes
    14y
    Originally posted by Joel Owens:

    I always try to live by my dad's saying.He told me to try to always "be nice and you will usually get more results with honey than vinegar".

    To further this idea, which I love...I've always heard "Catch more flies with honey" and "Get more with a whisper than a shout".

    These particular lines are from a song, but I've heard them all my live as well. Treat the inspector well, and you'll do fine.

    You didn't mention going back to them before you started with your contractor? $25-$80K is a really wide range...did the inspector give you specifics of what must be done vs. what can be grandfathered? Or did you just stick with the contractor's opinion/word?

    0Reply
  • Chris Masons
    Investor · Union, NJ · Member since 2011 · 838 posts · 295 votes
    14y

    Jason I feel for you. Sounds like you have a tough situation on your hands.

    I would absolutely lay it all out for the compliance officer. Explain yoru situation fully to him before you make any decisions. Maybe if he hears that you simply don't have the funds to do what he is asking and that you may have to be foreclosed on, he can meet you in the middle somewhere where things are brought up to code but in less of a intrusive manner.

    good luck,
    Chris

    0Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    14y

    Jason: can you update us on your dealings with the code compliance dept. and inspector? The numbers from your contractor sound way off. You can build new in your area for $100 a square foot. Even with demo permits, it's not $25K to take down and haul 800 square feet.

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    14y
    I am in 100% complete agreement. $25k to demo 800 sq. ft and haul??!!! No way, find a new contractor. What was the result from the inspector/building department?
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  • Jason A.
    OP
    Sacramento, CA · Member since 2011 · 17 posts · 1 vote
    14y

    Thanks for the continued in the interest in this post. Information has been difficult to get from the building department. I've talked to three levels of management and still don't have a clear picture. The original contractor also inquired on my behalf.
    Nobody that I've spoken too will provide a list of deficiencies of the house. They said it is up to the contractor to provide a plan to the county and then the county will respond. I believe the first step is to have an engineer come up with plans and drawings, but I'm hesitant to go that route ($4k) until I have a better sense of what my cost might be for the rehab to code.
    I agree with the other posts that the contractors bid is high. They actually only identified $67k worth of work, I added a buffer for engineering, permits etc. I'm assuming their plan is basically to rebuild in place.
    I did speak with another contractor who thinks we can try and approach the problem in pieces and see if the county will sign off on each component as we go (HVAC, plumbing, electrical, roof, engineering, etc) but again I'm worried about the individual pieces adding up to a total near $60k.
    Foundation $15k
    Roof $5-10k
    Engineering $4k
    Plumbing/Electrical $10k
    HVAC ?
    Permits ?
    Other ?

    The county did indicate they would not grandfather in any of the compliance issues and were not sympathetic to my situation, despite going out of my way to be professional and courteous in my quest for information. Originally they asked for any documentation that I had that indicated the size of the house when I bought it. The title, note, and appraisal have no mention of the original size of the house. When I spoke to the county after finding this info, they were no longer interested in it.

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  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    14y

    You sure that the appraisal has no mention of the size of the house? I would double check that.

    0Reply
  • Jason A.
    OP
    Sacramento, CA · Member since 2011 · 17 posts · 1 vote
    14y

    The appraisal has no mention of the original square footage of the house.
    0Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    14y

    Whoa. You bought an REO with an appraisal that reflects total square footage including the illegal addition of 800 square feet? Are you sure? When you bought in 2008, your lender's appraiser missed the illegal addition? What does the county assessor website show for square footage today?

    0Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    14y

    Your list of repairs makes it look like a gut rebuild, which is probably the job the contractor is hoping for. And it sounds like the county is stonewalling you now. You said you are $22K into the property? How much is the outstanding loan? Will the property work as a 3/1 if you demo the addition? How much work to close up where the addition was attached?

    0Reply
  • Mark D.
    Architect · Los Angeles, CA · Member since 2011 · 17 posts · 3 votes
    14y

    Not being up to code is one thing.

    The completed addition not being permitted is a different story.

    Have you pulled all of the permits on the house from the building department? All you need to give them is the APN number or address and they should be able to give you copies of all of the permits pulled for the given property.

    You can check the cities recorded square footage of the property on this GIS site - http://assessorparcelviewer.saccounty.net/GISViewer/Default.aspx

    Let us know how that compares to the current square footage.

    Originally posted by Jason A.:

    The county did indicate they would not grandfather in any of the compliance issues and were not sympathetic to my situation, despite going out of my way to be professional and courteous in my quest for information. Originally they asked for any documentation that I had that indicated the size of the house when I bought it. The title, note, and appraisal have no mention of the original size of the house. When I spoke to the county after finding this info, they were no longer interested in it.

    This is to prevent people from building an un-permitted structure and getting it approved after the fact. I'm working on a project now where an addition built in the 1970's has to be torn down because it was documented incorrectly (completely by mistake) and built into the setback.

    Try to develop a relationship with one person at the building department. This will keep you from having to explain the situation each time and you are more likely to make decent progress.

    You're going to learn a lot very quickly. Be persistent and record any information you have. Type up meeting minutes from the various city official you speak with so you have something to point to and quote.

    1Reply
  • Mark D.
    Architect · Los Angeles, CA · Member since 2011 · 17 posts · 3 votes
    14y

    Also, the fact that there may be no documented square footage may not be your demise. If there is a written description of the project (which should be on the original permit and any permits for additions) you can use that to back the fact that the structure, addition, etc. is permitted. If it's an older structure you may have to dig through the counties archives.

    I may be able to help you more if you are able to provide more information. Also, don't presume your contractor giving you the quotes knows the solution. Rebuilding is one solution, but spend time at the city and get all of the facts before you go that route.

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