Buying a House with Unpermitted Work: Risks & Solutions

Answer

If a home has unpermitted work, it can lead to several complications for both the buyer and the seller. Unpermitted work refers to any additions, renovations, or modifications made to a property without obtaining the necessary approvals or permits from local building authorities. This can include things like converted garages, added rooms, electrical or plumbing updates, or structural changes that were completed outside of official oversight.

For buyers, unpermitted work can pose safety risks, potential legal issues, and financial concerns. If discovered during the home inspection or appraisal process, it may affect the property's value or cause problems with financing. Lenders and insurance companies typically prefer properties with properly documented improvements, and unpermitted work can lead to higher insurance premiums or coverage exclusions.

Once unpermitted work is identified, buyers have several options: they can request that the seller either obtain retroactive permits and correct any code violations, negotiate a price reduction to cover the costs of bringing the work up to code, or even choose to walk away from the deal, depending on the terms of the purchase agreement and local disclosure laws.

Leaving the work unaddressed can create future liabilities. If the local building department discovers the issue later, the new homeowner might be required to pay fines, obtain permits, or undo the work altogether. Additionally, if unpermitted modifications lead to accidents or damage, insurance claims could be denied.

To protect themselves, buyers should thoroughly review seller disclosures, order a professional inspection, and consult with a real estate attorney if unpermitted work is suspected or confirmed. Addressing these concerns before closing is essential to avoid unexpected expenses and legal challenges in the future.