Oh no...Has this ever happened to you?

21 Replies

Hey Everyone!

If you actively do rehabs and flip homes, sooner or later you may get one of these!  Every state/county/city/village/municipality/etc is different in regards to Permits, so every now and then I am sure some of you out there push the limits here and there.

I just got "red tagged" on one of my properties due to a surprise visit from a city inspector who noticed my contractors repairing some siding on the exterior of the house.  I get a call afterwards stating that we are to cease work until we get the proper permits.

In my area, they want you to get a permit for every tiny thing you may be doing, even changing a supply valve under a sink if they want to push it on you.

In this scenario, once you are caught, you have to play by their rules so that you can get back on track and get what money you can still make on the property so long as the inspector didn't eat your profits away.

What's your story? Do you have a nightmare to share? How did you handle a surprise like this? Or are you the type to pull all permits no matter what?  I'd like to read what you have to share!

Ouch! Think I've been lucky so far since most of my work is on the weekends..

Good luck with the permit process, keep the site clean or they could start looking at other stuff, hide any new work if possible, put dirt on it, make it look old, you can always go back and clean it up..

You have to pull permits, that is just the cost of doing business. I see lots of guys get away without them, or just pay the fines and figure that is less cost than getting permitted every time, but for me if I'm doing anything significant I'll pull a permit. If it is truly only cosmetic work I may not but anything electrical, plumbing, HVAC, structural, is getting permitted.

From that picture looks like you got caught out by Tacoma Power for no permit electrical work. Now imagine you did no permit electrical work and sell the property to a family, house catches fire and burns down and a child dies. To me that is 1000x worse than the additional cost of doing permitted work. I like sleeping well at night, being fully permitted means I don't have to spend the next 20 years worrying about lawsuits quite as much.

Originally posted by @Bryan R. :

From that picture looks like you got caught out by Tacoma Power for no permit electrical work. Now imagine you did no permit electrical work and sell the property to a family, house catches fire and burns down and a child dies. To me that is 1000x worse than the additional cost of doing permitted work. I like sleeping well at night, being fully permitted means I don't have to spend the next 20 years worrying about lawsuits quite as much.

 When you have a licensed and bonded electrician changing out baseboard heaters for better efficient fan blowing cadet heaters, and then running wire for an additional unit, moving a vanity light in the bathroom, etc...I think I can sleep just fine not pulling a permit for it.

Don't get me wrong, I pull permits on my bigger jobs, but not on stuff like this.  There are times where it is just a money waster.  I have literally had a full bath completed, paid an after work completion permit, had the inspector walk in and flush the toilet, and then walk out...In downtown Seattle, that one toilet flush costs $600...there are times its ridiculous.

We had something similar happen in my city.  A house flipper gutted a whole house and redid everything.  But he refused to provide proof of permits for any of the work done.  

The house looked fantastic, but to me it raised a red flag.

Needless to say the house is still on the market at a much reduced rate....  Permits do vary by city.  I guess it's up to the owner to do what they do, but to me it's piece of mind.

The reason we don't like pulling permits: I pulled one to have an electrical panel changed. The inspector says well, if you're going to spend the money to do x you should go a head and do y and z. I'm not Jonny homeowner trying to dump money in a house. He ran us up an additional five hundred bucks changing the exterior conduit when the old was just fine.

From a liability standpoint I permit the electrical, plumbing and structual work in my rehabs. They're not as picky in my area in terms of cost and availability vs others. When I put the property back on the market there is a detailed sheet of work/upgrades done with notes that work was permitted with the city. I also provide this info to the appraisers as a permitted rehab is more valuable than non permitted.

Originally posted by Account Closed:

The reason we don't like pulling permits: I pulled one to have an electrical panel changed. The inspector says well, if you're going to spend the money to do x you should go a head and do y and z. I'm not Jonny homeowner trying to dump money in a house. He ran us up an additional five hundred bucks changing the exterior conduit when the old was just fine.

 fully agree. we invite you to the city of Berwyn, IL. you bought a foreclosure on our turf we will make the process "easy"

all BX must be gone - does not matter if all walls are exposed or not

all cloth wiring must be gone

all basement on single switch

arc fault on every bedroom

fan rated boxes. 

ground rod

grounding to the water meter

put new outlets here and there ...

and more more fun stuff

we will make you add so much new stuff that your panel needs to be replaced as you will run out of space. Ricky will take care of u ...

I understand the hassle of the permits, but I can understand why the exist.  Whomever buys the property should get a rehab that is done the right way and not the cheapest way.  Like someone said, doing it right would help me sleep at night.  

Also, wouldn't it be a liability issue?  If something did go wrong and there was a lawsuit, wouldn't doing work without a permit be a major issue?

We got red tagged once. 

We closed on a house on a Friday afternoon, had the dumpster delivered and gutted it over the weekend so our contractors could come and do their bids and we would know the scope, costs etc to obtain the permits before starting any rehab work.

The red tag went up midday on Monday, triggered by the dumpster. It appears that the dumpster companies provide weekly lists to our building dept.

Long story short, we worked it out but they weren't too happy with us and made us do $500  - $1,000 of extra work on the project for penance. We also had to battle with them on the value of work being done on the permits as they thought, incorrectly, that we were low balling the estimates to pay lower permit fees.

I understand  having permits for the major fixes however I am against big government. They will make you pull a permit for anything and then you have to wait for them. Then when its all done you make $30000 for all your efforts but then here comes the IRS asking for 30%. Thats on top of all sales taxes and permit fee's that you already paid. 

@Elliot - Cash strapped Towns/Cities are looking for revenue wherever they can and building/dump permits are an easy area to extract extra revenue from. While inspections can be difficult with job scheduling, they do tend to keep the trades honest by ensuring that at least a minimal standard of care (and safety) goes into repairing / rehabbing. 

As for the 30% that you have to pay to the IRS on the flips, that is simply the cost of doing business and exactly why I stick to buy/hold/rent and don't flip in the short-term.

@Rick Bassett    cash strapped cities and towns always look at the revenue not the spending side of the equation  but that is another topic.  

We have received letters from the town. Once they sent notice they were coming by to check to see if we were putting in a new septic... now if we don't pull a permit for that we get a stupid award.

Our contractor got a stop work one time for the roof.  He was supposed to pull a permit but  didn't and the inspector put a stop work on it. (it was a big multiday job too) I come by the apartment to see the door tagged. For us it wasn't so much about the inspection of the roof because we knew what was done it was more that he was supposed to pull it and didn't and the tagging makes us look unsafe to the tenants.

@Colleen F - I agree with you on the spending issue but as you say it's another topic.

Septic in our town is a nightmare as there is a long and painful approval process (with engineering required) by the Health Dept for all repairs / replacements. The penalties for skipping the approval process in our area are substantial. It isn't worth the downside as someone will always see you and you will be caught.

Roofs are an interesting issue as workers are not only being scrutinized by building departments but by OSHA. Roof permits are cheap and inspections are easy as they're done after the fact from the ground, so it isn't worth skipping them. The OSHA side is a whole different story (I'm sure that there are BP posts about it) but it's with saying that the penalties for safety violations by OSHA, regardless if you have a permit or not, can be very substantial. 

Originally posted by @Ryan Hall :

I understand the hassle of the permits, but I can understand why the exist.  Whomever buys the property should get a rehab that is done the right way and not the cheapest way.  Like someone said, doing it right would help me sleep at night.  

Also, wouldn't it be a liability issue?  If something did go wrong and there was a lawsuit, wouldn't doing work without a permit be a major issue?

 don't assume that just because the permits were pulled the rehab was done right. it all depends on city inspectors and who did the job. some cities hire out inspectors (private companies) some have inspectors on staff. some inspectors on staff don't care, some dont' know what they talking about.  i have done hundreds of permits and only a small percentage of those permits were closed by a inspections that lasted more than "5 minutes".  most of the inspections is a joke and paying for permits is just another tax.  

And flippers wonder why some people don't think much of them, and why some prospective buyers will tell their agent, "no flips."

Un-Permitted electrical, followed by rationalization and excuses. Shaking my head here.

@Richard C. - I think the world is starting to understand that in many (but not all) cases flips mean cut corners. One has to look no further than the flip shows on television to understand that the primary motivation of the flippers is keeping costs to a minimum while turning (flipping) the property as quick as possible.

As a newbie investor, I love "stalking" these posts.  Thank you all for the input.  It looks like pulling permits is worth the time for anyone interested in mitigating risks, which is the category I fall under.  

This may sound a bit funny, but I had no idea permits were required for the type of work outlined above.

Thanks again, everyone.

"don't assume that just because the permits were pulled the rehab was done right. it all depends on city inspectors and who did the job. some cities hire out inspectors (private companies) some have inspectors on staff. some inspectors on staff don't care, some don't know what they talking about. i have done hundreds of permits and only a small percentage of those permits were closed by a inspections that lasted more than "5 minutes". most of the inspections is a joke and paying for permits is just another tax."

ABSOLUTELY.....we have seen that many times.

& as an aside.......

We just looked at an estate sale. The daughter informed us that the city insists on a plumbing inspection before its sold & also wants to inspect the sump pump to make sure its in the correct location!!!!!

The sump pump was installed in 1980 when the home was initially remodeled. Then in 2012 the property had significant basement reconstruction & drainage work (old block basement) with all the required permits & inspections including that of the sump pump where the french drains were to terminate. 

Now to get the required pre-sale approval the owner further needs to file a $2,500 cash deposit with the town & only then will the bldg inspector determine the cost of the permit (most permits apparently run $1,500) & maybe give the OK for the existing sump pump site. They were quoted $3500 if the sump pump has to be moved.

Then our agent with us told us of an elderly lady in the same city who was recently forced to get permits & install a sump pump for a home on slab????

This same city then generously supplied 4 very large trash containers to accommodate the cleanup of the old ladies home. The containers are picked up mechanically by the truck so they made sure each container was not overfilled. The daughter then got a written warning that all trash in the containers had to be in plastic bags that are also to be tied, (& I thought plastic bags in dump sites was a issue). After the second load was picked up, again without the plastic trash bags, she received a citation & a $250 fine.

Insane!!!!

I got a letter from the health dept for tall grass and overgrown lawn on a house I bought 1 month prior . I called them explained I just bought the property and as soon as the weather breaks in a month It will be done . They were fine with that .  Then we came in with a tractor and bush hog and mowed down years of growth , it looked much better . On the second day I got a visit from the grading inspector telling me I was clearing land without a permit .  I showed him the health dept notice , and asked , " since when do I need a permit to mow a lawn ? "   He showed me aerial photos and said the property was tree covered .    I showed him what we mowed , bamboo , which is a grass , like I said we mowed the grass .    He put away his stop work order and gave me a paper saying I was in compliance .   

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Originally posted by @Richard C. :

And flippers wonder why some people don't think much of them, and why some prospective buyers will tell their agent, "no flips."

Un-Permitted electrical, followed by rationalization and excuses. Shaking my head here.

 As a contractor, doing the work correctly is why I sleep well at night. That doesn't mean there aren't expensive ways and cheaper ways of doing things correctly. In California, where I am from, a permit and passed inspection does not limit your liability. Inspectors there and I expect most everywhere vary widely in their abilities and perfectionism. As an investor you need to know what your contractor is doing to your property.

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