To permit or not to permit ??

[John Berg]

This can be very expensive and time-consuming decision. I've been flipping homes in Dallas for a 6 years. I continually struggle as to whether to get permits or not. When I do it usually costs me two to three weeks and thousands of dollars (i.e. Inspectors arbitrarily telling you to rewire the house). On the other hand you must disclose whether you got permits or not when you sell. I have listened to all the BP Podcasts and I'm surprised this is not more of a topic for flippers... To permit or not to permit?

[Darren Sager]

John Berg If you're doing work that requires a permit than you should get one. Here in NJ we have a Seller's disclosure form which the seller has to fill out and sign. If you don't tell the truth on the form about work that was or wasn't done you're liable.

As an real estate agent I can tell you its important. Factor it into your time table. If you consistently flip in a certain town you might get them to come inspect sooner than later since you're giving them constant income. Town will also like you because with the improvements they can increase the taxes on the house.

[Jon Holdman]

I think its not more of a topic of discussion because there's little to discuss. I agree with Darren Sager. If the work requires permits, get them. I've never had
"Inspectors arbitrarily telling you to rewire the house". I have had inspectors tell me to do work I didn't expect, but its not arbitrary. You were doing work that required rewiring and didn't expect it.

OTOH, lots of rehabbers choose to fly under the radar and try to avoid them. I funded a deal with a rehabber that did exactly this, without our realizing it. But he was caught and was out of money and ended up losing $30K on the deal. He only cost me a small amount of actual money, but cost me and my partner about $30K in income we should have made over the period.

You also run the risk of the deal coming back on you later. If you do something that doesn't conform to code, and I can guarantee that you are if you're not getting permits, then you may get sued for it later. I'm not saying you are deliberately doing non-conforming work. I am saying the building codes complex enough that its difficult to get everything right without the inspector checking over your work.

[Johann Jells]

I'm curious, when you're flipping a SFH, can the owner DIY mechanical work and pull the permits himself the way an owner/occupant can? Assuming all work should be to code, when permits means the work MUST be done by a licensed contractor rather than the flipper and his team it can change the entire economics of the deal.

[Roy N.]

John Berg:

In some jurisdictions if it is revealed you did not pull permits {which will happen as it is part of your disclosure as a "professional"} an annotation will be placed on the title of the property and title will not be transferrable until any missed permits and inspections have been addressed .... even if that means reopening your walls because you missed your rough-in inspections.

[Jon Holdman]

Johann Jells it depends on the jurisdiction. Around here, no, the owner cannot pull permits or do work on a rehab that requires licenses. Only if you're living in the house. My particular city requires you stay in the house at least a year after doing a project like that.

Now, for the most part the licensed work is plumbing, electrical and mechanical (HVAC.) If you're doing a small project, such as replacing a furnace, the individual contractor can pull permits. If its a big remodel, a GC must pull permits and must name the licensed subs. If you're a serious rehabber, you would probably get your own GC license and then hire your own subs. There's still lots of work someone can do.

In the case of the deal I mentioned, the inspectors not only made us open up walls, but dig up parts of a finished basement that hadn't been touched in decades.

[David Niles]

I think the to permit or not would be less of a topic had local townships and citys made them less of a money grab / cash cow. I completely understand and back the safety issue permits as this is what it all was originally about, just doesnt seem thats what their true interest is anymore.

When myself and one of my guys were threatened with arrest by a city inspector because we were fixing 3 pieces of aluminum window trim on a friends house that was damaged by a bush too close to the house, what exactly did he want to inspect and whats the safety / health issue? Oh no, its because we didnt file the $100 permit for the 20 minute fix I was doing as a favor.

[Johann Jells]

Originally posted by Jon Holdman:
If you're a serious rehabber, you would probably get your own GC license and then hire your own subs. There's still lots of work someone can do.

I did just that a decade ago when all I had to do was pay $100 for a license and $250 for a bond, but the city here recently made it $100k minimum bond. It's just not worth maintaining that for my own units. It was stupid stuff anyway, I was told to replace kitchen cabinets no permit was needed, but was to hang a cab in a new location. You can't build a simple closet without a permit. It builds a culture of scofflawing in both the owners and the contractors.

I think a plumber who replaced a boiler for me last year decided he'd rather not get his final half payment than go through the hassle of getting the permit from the city. Of course this was just before Sandy and I'm sure he's been busy as hell since.

[Josiah Halverson]

I LOVE THIS DISCUSSION because I think there really is much to talk about. As a someone brand new to rehabs, I am torn between permits and no permits. here's why.

I think it's safe to say than more than half of all rehabbers don't pull permits and don't require the necessary licenses. I know some very up-standing people doing all kinds of work without a permit and I totally understand their reasoning. I think you do as well - I.e. money, time, etc.

As someone that has been involved in the athletics industry, I see a very similar comparison. The sports industry is so unfair. You might be one with tremendous talent and fierce training ethics that sets you apart from the competition. But what happens when you graduate college, enter the pros, and can only hold up for a couple of years before your body breaks. Compare that person with the one that has chosen to take steroids and now can stretch out his career for many more years because his body can hold up better now. Look what happened when Lance Armstrong got busted and came off drugs. He didn't have a chance because all of his competitors were enhanced! But steroids are banned! So does this create a level playing field for those than want to abide by the rules? Absolutely not! But that's how it is. We except that most athletes are using, we understand that the risk of being caught is a game that is just part of the gig, and we move on. Is that mess up or what!

So is my playing field fair if I pull permits every time it is needed? Is my risk worth the reward? Can I be an upstanding businessman and community leader when working this way? After all, our character is more important than money, right?