RF, Home Buyer in Rohnert Park, CA

House built without permit, what happens if purchased as is?

Asked by RF, Rohnert Park, CA Fri Jan 16, 2009

The house is in Santa Cruz County, CA and was build without a permit. If a buyer purchases as is, what are the consequences? What will the buyer have to do?

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I have watched homes being built with permits and not to code. I have watched as inspectors sign off on work they have never seen. All the hidden work that has numerous code violations stays hidden under sheetrock and paint.

I have also watched as my parents built a beautiful 5400 sq ft luxury home in Texas without a single permit. This saves a significant amount of money over homes built in Seattle for example (approx $200K). My parents built their home for about $150K. NOT ONE PERMIT! All of the work is to code.

Lets face it. People survived for years and years without the permit process. I see virtually no benefit to permitting in this age, other than a way to support bloated, overpaid local governments.

1 vote Thank Flag Link Sat Sep 11, 2010
It's true we never needed permits and we don't need them now! I'll see if a petition on change.org can be made, so a property under 10,00ft won't be restricted by building permits country wide.
Flag Mon Dec 23, 2013

I agree with all the previous posts. With so much inventory, it is hard to accept these properties that have permit challenges. It could be built fine. But it also could become worthless at the prospect of ripping apart walls to see support structures and electrical work.

Maybe it is the actual lot that you are interested in and valuing the property means bull dozing the property. In this market, it is fair to offer at the value of the land/home site. This home sale will resort to all cash offers and those are few and far between in this market.

Web Reference: http://www.TalkToCJ.com
0 votes Thank Flag Link Fri Jan 16, 2009
Ralph, Curt Abramson from Bailey Properties in Santa Cruz here. Although all the previous answers here are valid, It's worth mentioning that if the property is sufficiently discounted and you feel you can address the repairs or modifications you may eventually be required to do, the house may be a worthwhile purchase. if the entire home is non-permitted, what is the value of the land and legal improvements? Expect to pay cash - loans are probably not available for this type of purchase.

Definitely, this type of purchase is best for the savvy buyer or developer willing to endure the risk involved.
0 votes Thank Flag Link Fri Jan 16, 2009
It is relatively uncommon to find a house that was constructed entirely without permit - it does happen, of course, but it's much more common to find a house that has had, say, an unpermitted addition or remodel. In either case, however, the consequences are that you open yourself up to liability that the county planning and zoning department will come after you and force you to either a) demolish the improvements or ) get an as-built permit for them, if that is economically feasible. Getting an as-built permit is expensive and time consuming, and you will have to bring the improvements up to code if they are not already. Given the state of the market, I'd pass on a property that had significant permitting issues, why deal with it when there are so many other well-priced homes available?
0 votes Thank Flag Link Fri Jan 16, 2009
Hi Ralph, you may also run into a problem regarding valuation.

There are two different valuations that come into play when we talk about these situations. The first is the value placed on such a property by current market demand. The other valuation comes from a licensed appraiser.

Given the uncertainty of unpermitted work, an appraiser will not be able to place any value on such work. For example, say a Buyer places a $500K offer on a home that has $50K in unpermitted remodeling. In this simple case the appraiser would assign a $450K value, which would require the Buyer to come to the escrow table with an additional $50K as the lender would only provide financing on the appraised value of $450K. Another issue is that of safety.

Also, do you really know that the work was done properly? If not, you may want to bring in individual trades to confirm how "stable" the electrical and basic structure is.

In short, buying a home with unpermitted remodeling is gambling with your financial and potentially your personal safety.
0 votes Thank Flag Link Fri Jan 16, 2009

This could rival opening Pandora's box.

We recommned seeking legal advice and contacting the city. Make no mistake, the city doesn't care about "AS IS"....they still view this home as being a serious violation.

This is not legal advice but the range of consequences could be: fines, no certificate of occupancy, inspections, correcting deficiencies etc.

Our recommendation is to proceed with caution and with legal support.
0 votes Thank Flag Link Fri Jan 16, 2009
It's interesting not even one person in this forum mentioned the property tax consequences when one builds without obtaining proper permits. The person who builds without a permit does not report the added square footage to his house to his/her local assessor's office. This means lower property taxes for the violator while other non-
violators are paying higher taxes.. Doesn't this constitute tax fraud?
Flag Wed Dec 17, 2014
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