Marianne,

You are correct to respond to these "red flags." Our recommendation is to begin with the city/county that would have been responsible for issuing these permits to find out what the extent of this neglect would involve.

The fact remains that you must take measures to protect your best interests prior to closing. Our recommendatio is to seek legal counsel for review of this situation and their recommendation. It may cost you s few hundred dollars but save you thousands in the long run.

Follow this through and protect your interests.......

Good luck

Thanks everyone, this is great advice! I was concerned I was being a bit nit picky, but all of this confirms the real risk in not getting the permits, and it's really no question now. Thanks again for your help! I'll let you know how everything turns out.

Marianne

Marianne: It might be the same property I sold many years ago, except that that problem was fixed, so I know this is a different case.

In the first place, if the town figures it out, they will not issue a CO, so you can't legally move in. (Their housing inspector has to pick up that additional work was done and then go look for the permits for it. He or she may just miss it. Nobody's perfect.)

The basic problem is that, in order to get an approval for the work done, the building department will want to see the rough work behind the walls and above the ceiling. Oopsy! There's a ton of work and rework/repair needed here even if the underlying workmanship is ipsie-pipsie good and there's no guarantee of that.

You have already been told that failure of undisputed work MAY give the insurance company an out on claims. So add that to the burden.

What to do? In the case in which I was involved, a $7,000 escrow was left by the seller. The sellers were very hot under the collar, because it only came up the day of closing and the attorney for the buyer put his foot down and said "NO CLOSING UNTIL THIS IS SETTLED." The remediative work was done after closing and I did not represent the buyer, so I never did hear how it all worked out but I'd say this: Get an estimate of the costs involved to get the permit, the work inspected and whatever might be needed to make correct repairs and then to have the property restored to the way it was when you made the offer. If you are not represented by an attorney, now is the time to start. As a Realtor, I would NOT want to handle this myself by negotiating something that would occur after closing and the proper compensation for it. On the other hand, the seller may come to the conclusion that he or she is stuck and can get the work done before closing and will do so. End of problem.

On the other hand, I've seen a seller refuse to restore a property that had a problem that arose subsequent to its condition as of the date of the offer and then my seller walked. Yep. Walked.

The answer is that things can go either way, depending on how hardheaded the sides can be. But being hardheaded enough to avoid a risky, costly situation may be just what you need to be.

Best of Luck!

speak with your attorney, often stated in the conntract is language requiring seller to have all required permits etc ( you could also report them to local building inspection dept, it just makes an antagonistic situation which could be avoided if seller is willing to take out permits for the work completed) In any event you should insist either permits taken and closed out prior to closing or get an escrow sufficient to cover worst case scenarios. (I purchased a home a few years ago where seller hadnt gotten permits and some work didnt pass follow up inspections.) It was over a year before issues were addressed and even then not well. There may also be a clause where seller would have to reimburse you your expenses if they can not close. (closing may require a clear certificate of occupancy which might not be possible with out addressing the permit work done) Again, speak to your attorney.

Marianne,
Probably the most serious issue involved I haven't seen mentioned yet. If you go ahead with the purchase without having the problems resolved you could potentially suffer huge losses. Case in point, after you purchase the home there is a fire. The insurance investigator discovers the work was done without a permit. There is evidence that the fire started due to electrical problems in the finished basement. The claim is denied because the work was done illegally. Require the seller to get the necessary inspections to obtain permits. I understand you have invested your funds but the losses you could suffer are much higher than any monies you would lose by canceling the contract. An attorney can look over your paperwork and help you determine the best course of action.

You can hold money in escrow to pay for the fines and potential repairs/modifications as required by building codes for the municipality. Since removing a structural wall and finishing the basement are both major items, I would seek to hold many thousands of dollars in escrow until the town can approve the work. The costs could be minor or major depending upon what the town wants to inspect. For example if electrical work was involved, an electrician may be required to come in and certify the work. Many electricians will not do this without a lot of probing, breaking sheetrock, etc. If the homeowner did the electrical work himself without a permit, it could become a big problem.

The line that "he did not think he needed a permit" is garbage. He knew, he just chose to go ahead anyway - a common mistake.

The other option is just close and assume all the risks yourself. But then it all becomes your problem when you go to sell.

I'd choose to hold back money in escrow. A lot of money. Then I'd have the town in, do everything they say, pay for it with the sellers money, and refund the difference.

-Marc
Marc Paolella
Relocation Director
Member, Worldwide ERC
Licensed Realtor NJ
Licensed Appraiser NJ & NY
Century 21 Joe Tekula Realtors
Agent of the Year 2008
Owner: Sands Appraisal Service, Inc.
Phone (direct): (973) 584-4235
web: http://www.marcpaolella.com

Hello, Marianne!
Oh well, sometimes it is happened.
I understand you invested a lot of money into purchasing process already, and you don't want to back out off contract (even if you can do it very easy in this situation).
So, ask your attorney to mandate a credit from the seller for you to obtain all necessary permits, or reduce the sale price. If seller will refuse, report him/her to zonning and building department of a municipalited, he/her will pay fine and will be forsed to obtain all permits. If the sellers is not cooperative, don't be nice.

SIncerely,
Yelena
.

Insist that the permits are retrospectively obtained else walk. The money that you have currently spent is a drop in the ocean compared to the possible alternative. If you turn a blind eye and purchase the house then decide to sell in X years time: the purchaser could make you retrospectively get the permits. You could be in trouble with the town and if the work hasn't been done properly, you could have to 're-do' the work.

Work with your buyers agent, could be bank may not approve the loan w/o permits .

Lynn911
~ National Featured Realtor and Consultant, Lecturer regarding Credit Repair, Mortgage Loan Officer