Refinancing a house after renovation but no permits.

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Refinancing a house after renovation but no permits.

Paul Shepherd
Cleveland, OH · Member since 2018 · 22 posts · 4 votes

Hi All! Looking to tap into the wisdom and guidance of this tremendous community.

My wife and I have a small rental house that we are moving into and have already sold our house we were living in. We decided to do some renovations to the place prior to moving in. We have a limited timeframe so we started digging into some demo and framing and have decided we would like to add a second bathroom. We originally weren’t going to get permits for the work, but now we’re thinking we should.

My question really is if we don’t pull permits and move forward with completing the renovations, are we going to be screwed when we try to refinance the house if that second bathroom isn’t permitted? Or, will the appraiser and lender just see a renovated two bed and two bath and appraise/lend accordingly? The county auditor’s site will still say 2 bed 1 bath instead of 2 bath. Also will we be sorry when we go to sell?

Is there a way to get the auditor’s site updated to reflect the 2 baths without it being permitted?

We aren’t adding to the structure, just changing some things within the existing structure.

I know pulling the permits is best practice, but with Covid, I’ve heard it’s very slow going through that process and that’s time we felt we didn’t have.

Thank you in advance for your guidance!

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Jake Roland
Rental Property Investor · Opelika, AL · Member since 2017 · 113 posts · 93 votes
6y

@Paul Shepherd I'm sure it depends on your area, but in my experience no appraiser or buyer has ever asked to see permits for anything. Or gone to the courthouse to check if something was permitted. If you are adding on sqft it may raise a flag to someone, but just changing within the current structure, and as long as it's done correctly to where an inspector can come in and not find anything drastically wrong with it (toilet too close to the wall, etc) I doubt you would be screwing yourself when you went to sell it. I just did exactly what you're talking about, turned a 3 bed 1 bath into a 3 bed 2 bath within the existing sqft, without permits, it recently appraised for what I expected and counted as a 3/2 and was never asked about permits. That's just my experience though. 

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  • Jake Roland
    Rental Property Investor · Opelika, AL · Member since 2017 · 113 posts · 93 votes
    6y

    @Paul Shepherd I'm sure it depends on your area, but in my experience no appraiser or buyer has ever asked to see permits for anything. Or gone to the courthouse to check if something was permitted. If you are adding on sqft it may raise a flag to someone, but just changing within the current structure, and as long as it's done correctly to where an inspector can come in and not find anything drastically wrong with it (toilet too close to the wall, etc) I doubt you would be screwing yourself when you went to sell it. I just did exactly what you're talking about, turned a 3 bed 1 bath into a 3 bed 2 bath within the existing sqft, without permits, it recently appraised for what I expected and counted as a 3/2 and was never asked about permits. That's just my experience though. 

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  • Martin L Anderson
    Rental Property Investor · Lakeland, FL · Member since 2019 · 18 posts · 2 votes
    6y

    in my experience as drafter it would be best to permit the addition of the bathroom, as you mentioned the county site will still say it is a 2/1, to have it reflect correctly going forward permit it.

    it also depends on where you are and what the law/codes are there.

    I know in central FL if it is not permitted it does not count.

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  • Stephanie P.Pro Member
    Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
    6y

    @Paul Shepherd

    Here's what will happen.  

    You'll get a buyer because the property and work completed will be beautiful. The MLS will show however many beds and baths. The county will show a lesser amount and there will be a discrepancy on the appraisal. When the conditions come out for your buyer's loan, the exact verbiage from the underwriter will be:

    "Permits for additional bathroom or proof the work was performed in a workmanlike manner."  @Martin L Anderson is exactly right; "if it is not permitted, it does not count."  Fannie Mae only says that the appraiser has to comment on the appearance and general workmanship, but in this era of tightening guidelines, you're sale is on the precipice.

    I'd say get it permitted

    Stephanie

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  • Mike McCarthy
    Investor · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    6y

    I’d vote for the ‘get it permitted’. Most areas are homeowner friendly (or at least tolerant) and will help you through the process. Most inspectors and inspections aren’t the horror stories you hear.

    It’ll cost a few dollars more, but you’ll be proud when you get the ‘passed’ sticker - and you won’t have to worry about it in the future!

    1Reply
  • Martin L Anderson
    Rental Property Investor · Lakeland, FL · Member since 2019 · 18 posts · 2 votes
    6y

    in my experience as drafter it would be best to permit the addition of the bathroom, as you mentioned the county site will still say it is a 2/1, to have it reflect correctly going forward permit it.

    it also depends on where you are and what the law/codes are there.

    I know in central FL if it is not permitted it does not count.

    0Reply
  • Dan Maciejewski
    Realtor · PInellas County Largo, FL · Member since 2016 · 902 posts · 810 votes
    6y

    Changing cabinets or small stuff you could maybe get away with depending on local market, but I would say adding an entire bathroom would almost always require a permit to sell.  

    Some areas would even require walls to be ripped out/ the whole project to be re-done to inspect if the permit was required after the fact!

    I have 23 municipalities in my County and each one's building department is slightly different, but a bathroom can be royally screwed up if not done right, so most would make a big deal out of it.

    The lender will rely on the appraisal, but title/ closing attorney might bring it up.  Plus some appraisers are not going out right now and would completely miss the bathroom!

    In the long run permits are cheap.  @Stephanie P. is right -- do it the right way and you won't regret it; cut corners and you may regret it a lot!

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