Permits are legally required for most home improvement projects, but some homeowners still choose to proceed without one. This might save them time and money initially, but it can drastically reduce their home’s value when it comes time to sell, especially if the addition was substantial.
If you have an unpermitted addition on a house you’d like to sell, whether you decided to make the change without a permit or the previous owner did, you still have options for selling your home. But you should expect the process to be a bit more complicated than with a traditional sale.
If unpermitted additions later cause a hazard in the home and someone is injured or there is damage to the property, the loss will likely not be covered by the buyer’s homeowners insurance policy if they investigate and find evidence of unpermitted work. This certainly makes a home less desirable in the eyes of the buyer, because it causes a lot of uncertainty over whether the buyer will be financially protected from future losses.
An appraisal becomes more complex when there is an unpermitted addition. Some lenders won’t issue a loan for a house with unpermitted work, while others may request that the additional square footage not be included when determining the home’s value. This can result in an appraisal that is lower than your asking price, which means the buyer won’t be able to secure financing for the entire amount less the down payment. That’s why most buyers will expect a price discount on a home with unpermitted additions.
Related: 8 Reasons Pending Home Sales Fail
If you know about unpermitted additions to your home, you are required by law to disclose that information to the buyer. And even if they’re aware of the additions and choose to purchase the home anyway, they can still file a lawsuit against the contractor if the additions were not done to code and result in an injury.
It’s best to go into a sale armed with information. Since the buyer will most likely do their due diligence, you should do your best to get ahead of the issue and find out if the previous owners made any unpermitted additions to your home. You can check city and county records to see if your home’s current structure matches the permit plans. It’s free to check and can often be done online.
If your house has unpermitted additions, you still have options for selling it. The right decision will depend on your budget and timeline for moving.
One option is to go to the city or county and apply for a permit on the additions retroactively. If you made the additions yourself, you’ll likely incur penalties and even additional taxes on top of the permit fee. If the additions were the work of the previous owner, the city or county might waive these additional costs. But you’ll still be responsible for any work required to bring your home up to code.
An inspector may ask you to tear down some of the construction so they can examine the work. You may need to rebuild portions to meet building code requirements. In the worst case scenario, you may need to remove the entire addition. That would likely result in a lower appraisal than you expected. If you want to estimate the cost of meeting the permit requirements, hire a contractor to look over the unpermitted work.
Be aware that getting a retroactive permit can take weeks or even months. If you don’t have the time or the budget for a retroactive permit, your only option may be to sell your home as-is.
You can choose to sell your home as-is and disclose the unpermitted additions, but you’ll need to set the asking price well under market value to attract buyers. You might need to price your home as if the extra bedroom or bathroom was never added. Work with a realtor to determine how best to price your home, or you can sell your home off market.
If you need to sell your home quickly, consider selling with Sundae. Investors on our marketplace compete to buy your home, so you can get the highest price possible. You’ll also be able to avoid retroactive permitting costs, real estate commissions, and even closing costs, and you can close in as little as ten days. We’ll even give you a $10,000 cash advance after your inspection, should you need it.