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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  • Jason A.
    OP
    Sacramento, CA · Member since 2011 · 17 posts · 1 vote
    14y
    Originally posted by K. Marie Poe:
    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?

    The appraiser noted an addition, it does not mention the size or whether or not it was permitted. There is no mention of what the original size of the house was in the appraisal, 1080 sqft. County assessor shows 1080 sqft.

    0Reply
  • Jason A.
    OP
    Sacramento, CA · Member since 2011 · 17 posts · 1 vote
    14y
    Originally posted by Mark D.:
    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.


    There are no permits at the building department for the addition. The addition is roughly 800 sqft on top of the recorded 1080 sqft, for a total sqft of about 1800, as listed on the appraisal.
    0Reply
  • Jason A.
    OP
    Sacramento, CA · Member since 2011 · 17 posts · 1 vote
    14y
    Originally posted by K. Marie Poe:
    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?

    Loan is $120k, the property will not produce income as a 3/1. It would be close to a wash without accounting for vacancy and maintenance. The current bid to close up where the addition starts and demo the addition is $25k

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

    Jason: your 2008 appraisal has me stumped. Do you have the entire doc, or just a summary or cover page. I've never seen an appraisal without square footage for the subject property and all comparables. Is it an actual appraisal? Who ordered it?

    As you can see, CA investors on BP really want to know what you are dealing with and how we can help. It's probably true everywhere, but dealing with muni building depts. and code compliance depts. can be so frustrating.

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

    Your best option would be to file for a retroactive "as-built" permit. You will need a drawing set but it will only need to be the bare minimum to get through the permitting process. There are people/companies who do this for a living. Find a good one and it will make your life easier. They will know everyone at the city and will probably be able to tell you what will need to be done to pull a permit (if possible). If you know any architects now is the time to talk to them.

    If the actual construction is to code (within setbacks, lot area coverage %, etc.) this will just be a minor headache. Demolition and re-building is a major headache.

    Hopefully you know or can find someone familiar with this process to guide you through it. Knowing which questions to ask the city will help as well.

    Keep us updated and ask questions. There are a lot of us on the forum that have had similar dealings.

    0Reply
  • Jason A.
    OP
    Sacramento, CA · Member since 2011 · 17 posts · 1 vote
    14y
    Originally posted by K. Marie Poe:
    Jason: your 2008 appraisal has me stumped. Do you have the entire doc, or just a summary or cover page. I've never seen an appraisal without square footage for the subject property and all comparables. Is it an actual appraisal? Who ordered it?

    As you can see, CA investors on BP really want to know what you are dealing with and how we can help. It's probably true everywhere, but dealing with muni building depts. and code compliance depts. can be so frustrating.

    The appraisal has the total square footage. It is just like any investment property appraisal. It does not identify the addition square footage specifically. The addition is included in the square footage. Originally when I talked to the county they thought I should have known what was unpermitted. I told them that none of the paperwork I had (including appraisal) alerted me to the fact the house was originally a 3/1.

    0Reply
  • Jason A.
    OP
    Sacramento, CA · Member since 2011 · 17 posts · 1 vote
    14y
    Originally posted by Mark D.:
    Your best option would be to file for a retroactive "as-built" permit. You will need a drawing set but it will only need to be the bare minimum to get through the permitting process. There are people/companies who do this for a living. Find a good one and it will make your life easier. They will know everyone at the city and will probably be able to tell you what will need to be done to pull a permit (if possible). If you know any architects now is the time to talk to them.

    If the actual construction is to code (within setbacks, lot area coverage %, etc.) this will just be a minor headache. Demolition and re-building is a major headache.

    Hopefully you know or can find someone familiar with this process to guide you through it. Knowing which questions to ask the city will help as well.

    Keep us updated and ask questions. There are a lot of us on the forum that have had similar dealings.


    The house is within setbacks and we are ok on lot coverage, we already have verbal ok on that from the county. The reason we need an engineer is that the house does not appear to have footings. So we need drawings and engineering to retrofit because of lack of footings.
    0Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    14y

    Jason: 2008 was still a somewhat crazy time for RE and lending, but your appraisal doesn't sound right. Did you order it? Or your lender? It's not normal for an appraisal to ignore sq. ft. that is different from assessor data, or call out an addition without noting sq. ft. I don't know what you mean by "just like any investment appraisal". It sounds like a drive-by or a BPO.

    As for footings: do you mean the entire house has no footings or just the addition? I've bought several houses with no cement or concrete foundations, sometimes not even piers, just wooden footers to the ground. Lenders in CA usually refuse to lend on that. Again, the appraisal, if there really was one, is important here.

    0Reply
  • Jason A.
    OP
    Sacramento, CA · Member since 2011 · 17 posts · 1 vote
    14y
    Originally posted by K. Marie Poe:
    Jason: 2008 was still a somewhat crazy time for RE and lending, but your appraisal doesn't sound right. Did you order it? Or your lender? It's not normal for an appraisal to ignore sq. ft. that is different from assessor data, or call out an addition without noting sq. ft. I don't know what you mean by "just like any investment appraisal". It sounds like a drive-by or a BPO.

    We ordered it. The appraisal is similar to other investment property appraisals that were ordered by banks on other bank owned properties that we purchased in subsequent years. 2008 was definitely a crazy time. In fact, when we tried to refinance through the bank that owns the current loan, the addition would not pass their underwriting. So even though they made the original loan, they would not underwrite that same property for a refinance in 2011.
    Originally posted by K. Marie Poe:

    As for footings: do you mean the entire house has no footings or just the addition? I've bought several houses with no cement or concrete foundations, sometimes not even piers, just wooden footers to the ground. Lenders in CA usually refuse to lend on that. Again, the appraisal, if there really was one, is important here.

    There is likely a patio slab that the addition was built on without the proper concrete footings. The appraisal does not call attention to the patio slab or the possible lack of footings.
    0Reply
  • James H.
    Investor · Fort Worth, TX · Member since 2011 · 1k+ posts · 450 votes
    14y

    Retrofitting a foundation could be very expensive. If you could demo the addition and be just slightly negative, you could make up for that with other investments and save yourself from foreclosure which will also hurt you financially (possibley more) if you plan to use leverage on other investments. Having a break even to slightly negative income property is not as bad, in my opiniom, as many make it out to be - as long as you can afford to take the loss without risking your security. You'll still get (likely) appreciation and (certainly) principle pay down while you decide what to do down the road.

    0Reply
  • Ren Ver
    WA · Member since 2012 · 25 posts · 3 votes
    14y

    I agree with Brian. Building depts are desperate for funds since new construction permitting is in the pitts. No inspector will make a compromise !! What they will have you do is retrofit the addition to current building code/ 2012. This includes all facits of the addition, from footings/framing/electrical etc. THis means a new permit for the old addition. It does not matter if you were not the "person" that did the addition or not. Once you get the drywall OFF, and IF your framing/electrical is up to code, AND you have a permit in place, they will reinspect and hopefully you will pass 2012 code.
    It may not be cost effective to do all this and your profit will be affected, but might be best to take the addition OFF, then move forward with your rehab.
    Tough deal.

    0Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    14y
    Originally posted by Brian Hoyt:
    Retrofitting a foundation could be very expensive. If you could demo the addition and be just slightly negative, you could make up for that with other investments and save yourself from foreclosure which will also hurt you financially (possibley more) if you plan to use leverage on other investments. Having a break even to slightly negative income property is not as bad, in my opinion, as many make it out to be - as long as you can afford to take the loss without risking your security. You'll still get (likely) appreciation and (certainly) principle pay down while you decide what to do down the road.

    Brian Hoyt Normally I would agree that running neutral to neg. cash flow wouldn't be so bad. After all, I'm in CA and that's the norm in many areas here. But the OP says he bought in 2008 and so is likely underwater already, or barely afloat. He's got a $120K loan, and he says he's in an additional $22K. And now he is looking at a chunk of change to demo the addition just to get the house back to a 3/1. $150K+ for 3/1 house = not good. 3/1s are a different rental animal. Good for Section-8 but not good for getting market rents from non-subsidized tenants.

    If it were me I'd try to sell it as-is, and if I couldn't I'd sell it sub2 and let someone else deal with the county. There might be a contractor buyer or landlord buyer that can work with the current loan and use their own funds and labor to bring it to code. Some people like projects like that, especially if there is financing.

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  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    14y
    Originally posted by K. Marie Poe:
    ...

    If it were me I'd try to sell it as-is, and if I couldn't I'd sell it sub2 ...

    YIKES! All my trainers have always told me to never SELL sub2, that sub2 is "buy only" to protect yourself as much as possible. So K. Marie Poe, have you actually sold sub2 before? Be interesting to hear about that ...

    0Reply
  • Ren Ver
    WA · Member since 2012 · 25 posts · 3 votes
    14y

    Very interesting information that has been posted about this unpermitted addition. A RETRO FIT permit??? Are you kidding. Does not work that way here in washington state. Even if you have an architect inspect the property and redraw to code then resubmit the new drawings == if anything shows up existing, that is not to current national code standards they CAN make you rebuild from foundation footings up. Usually easier to just tear it off. Each case is different.
    This is a good time to mention that if you are buying an investment property ALWAYS check the permit section of your city for permits. Do not depend on your agent for this info, most of them DO not "get it" and how it might effect your exit profit.
    I see adds all the time in the MLS stating that there was a covered patio, extra covered parking, garage conversion, etc. IF IT WASN"T permitted, you could be put into a very unhappy position when you try to resell.
    Any structure whether attached or unattached (like a covered parking) is under scrutinity of the city or county. Here in Clark COunty the inspectors are driving neighborhoods, going into suspect rehab properties, and if there are any interior suspected areas they can AND will issue a STOP WORK order.

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  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    14y
    Originally posted by Steve Babiak:
    Originally posted by K. Marie Poe:
    ...

    If it were me I'd try to sell it as-is, and if I couldn't I'd sell it sub2 ...

    YIKES! All my trainers have always told me to never SELL sub2, that sub2 is "buy only" to protect yourself as much as possible. So K. Marie Poe, have you actually sold sub2 before? Be interesting to hear about that ...

    Steve Babiak Yup. Knowing what you know, you should never sell subject-2, too much risk. You should never buy a house without knowing there's an illegal addition either. Oops. I've sold some difficult props with seller carry backs (longest was 5 year terms), but haven't needed to sell anything sub2. But I would, with the right buyer. I have one buyer in particular that would take almost any deal today if the terms of the loan were decent. We don't know if the OP has any equity and/or what the terms of his loan are. I'm just saying if it were me I'd look at a look at all options and sub2 is one of them.

    0Reply
  • Orlando Lamas
    Miami, FL · Member since 2012 · 3 posts · 3 votes
    14y

    As an architect I deal with code violations everyday. Unfortunately when you buy the property you buy the code violations too , however, most of the fines can be negotiated down if you can prove that you are acting swiftly in resolving the issues... Such as hiring an architect or contractor and submitting for permits. In most cases an architect or engineer can do an As Built certificate for the structure and make some recommendations if needed to bring the structure into ompliance. If the structure is on the setbacks then it will be much harder to solve since its hard to prove a Hardship when it's illegal work.
    Orlando Lamas R.A.

    0Reply
  • Jason A.
    OP
    Sacramento, CA · Member since 2011 · 17 posts · 1 vote
    13y

    Now that the dust has settled figuratively and literally, it's time for an update. After a few more contractors and numerous discussions with the county the issue has finally been resolved. In some respects this post is cathartic. The total cost to remove the addition, plus carrying costs, plus permits, etc was roughly $20k. When the contractor demo'ed the addition they found noticeable termite damage which required rebuilding the length of the back of the house.
    The good news is it's all done and we just funded a refi to bring our mortgage and impounds to a few hundred dollars less than anticipated rent. The house was also appraised at nearly what we purchased it at in 2008 and if we sold today we would recoup nearly all of the money we had to invest to demo the addition as opposed to foreclosure. We'd still be out nearly all of our initial investment but don't have to deal with foreclosure, impact to credit etc.
    If the property can almost break even, that's good enough for me, for now, and I hope prices continue to appreciate.
    Thanks for all the comments on the thread!

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