Home Buying in Fremont>Question Details

Raja, Both Buyer and Seller in Fremont, CA

how do changes made to a home without permit effect its value ?

Asked by Raja, Fremont, CA Sun Jun 8, 2008

Help the community by answering this question:

Answers

11
BEST ANSWER
Renovations without permits can seriously affect both property value and salability.

You’ve probably seen the ads: “Gorgeous doll house – totally remodeled – spectacular family room addition.” You look at the pictures and, sure enough, it looks awesome! So wonderful that you want to rush over, see it and possibly write an offer before some other lucky person grabs it. And then you notice the fine print, “remodeled without permits.” What do you do?

My advice? Move on.

As both a professional REALTOR and licensed general contractor, I’ve encountered many homes with varying degrees of “improvements” without permits. For whatever reason, some homeowners can’t be bothered to obtain permits to work on their homes. This opens them up to serious liability for violating local municipal codes. “These codes exist to protect homeowners,” states Allen Lang, Building Official for Alameda County. Every year, improper installations and renovations cause deaths from fires, carbon monoxide poisoning, structural failure and more.

Even if the seller claims the work was done by a licensed contractor, you have no way of verifying the quality of work once the walls are closed with sheetrock. The only way to know for sure is to pull a building permit, remove large amounts of sheetrock as required and have the home inspected by local building officials. Extensive work may be required to bring the home up to code. Fines may also be applicable.

“Unpermitted renovations can be a ticking time bomb,” asserts William Schock, Building Official for the City of San Leandro. “You have no way of knowing if the work was done properly. Once the buyer accepts the seller’s renovations, takes ownership and moves in, they are now completely liable for any code violations by the previous owner. In some cases, the work cannot be brought up to code, and the new homeowner can be faced with the prospect of tearing apart the home they just purchased. There is no grandfather clause for work done without permits. If rooms or structures have been added that do not conform to zoning ordinances, those structures will need to be removed at the buyer’s expense.”

Our recommendation to sellers: if you’re aware of work done without permits, steps should be taken to get the work permitted and signed off by local building officials BEFORE going on the market. Even if unpermitted work is fully disclosed, it could be a lawsuit waiting to happen. It’s best to play by the rules so you don’t get burned.
1 vote Thank Flag Link Sun Jun 8, 2008
Hi Raja,

One important point not touched on below is the affect on Buyers of property that do not have proper permits for remodeling. 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.

In short, buying a home with unpermitted remodeling is gambling with your financial and personal safety. It simply is not worth the risks.

Best Regards,

Steven A. Ornellas, GRI, ABR, e-PRO, CMPS, RE Masters, MBA
REALTOR® / Mortgage Banker-Broker / Certified Mortgage Planning Specialist

Steven Anthony Real Estate & Financial Services
Cell: 510.461.6011 Skype: brokersteve
http://www.Steven-Anthony.com
1 vote Thank Flag Link Sun Jun 8, 2008
Hi Raja,

I just sold a house in Newark that was a two bedroom home but the garage was converted very nicely to a third bedroom. The buyers wanted to buy a starter home and this worked perfectly for them. They got 3 bedrooms at the price of two. There was a carport in front of the garage where they could still park two cars and there was plenty of street parking. Needless to say, the buyers were very happy.

So if the garage is converted into a little studio, as long as there is still some sort of parking, it could be additional revenue for a rental or an in-law unit. You must understand that the city can ask you to convert it back to a garage. Hopefully the conversion was done by a good contractor since the electrical and plumbing is very important and you dont want the house to be blown up by cheap wiring or done in a substandard way.

If I can help answer any more questions, please call me at 510-279-9580.

Meena Gujral
Help-U-Sell Achievers Realty
40083 Mission Blvd,
Fremont, Ca. 94539
0 votes Thank Flag Link Mon Jun 9, 2008
Thanks all for great guidance.
0 votes Thank Flag Link Mon Jun 9, 2008
In a buyer's market the lack of permits can substantially effect value, particularly if the unpermitted square footage of the home is not recognized in the appraisal. It can also effect value in the case of disaster. Additions made without permits may not be recognized by your insurance company if your home is destroyed. Recent wild fire victims in San Diego County face this problem with non permitted additions. Your county assessor will have drawings of the foot print of your home along with square footage information and notations on what rooms it includes. This is particularly important if your home is on a septic tank. The adequacy of the septic system is typically determined by the number of bedrooms. For instance if you have a 4 bedroom home and a 1250 gallon septic tank that should be fine. Add an additional bedroom and your requirement goes up to 1500 gallons and possibly more leach lines. In order to determine what is actually needed your county environmental services department would need to assist you. If there is substantial slope or soils issues, requirements may be different. Having personally marketed properties with non permitted areas and experienced negative buyer reaction, my best advice is to get permits on an "as built" basis. Hire a draftsman or architect to draw your home "as built". The person you hire should be able to submit the plans to your city or county and walk them through the system.
0 votes Thank Flag Link Mon Jun 9, 2008
Hello Raja,

Thanks for your return remark... It’s my pleasure to share my knowledge.
If a garage is converted into a small studio, does it leave one care garage space as a garage? Does it have three car garage and one car potion is converted or two/one car garage is converted? In my experience, working with buyers, if a single family house does not have a garage at all, but extra living space, that does not add value to the property. That property is less desirable, unless they added a detached garage to house as well, when they converted actual garage into a small studio. Attached garage is desired and property would sell faster if a home has a garage.

As far the appraisal concern, one of the answers explains about the sqft of the home. If the additions are done w/o permit, appraiser can’t use that added sqft. into the calculation for higher value. If the workmanship is poor, it may have negative impact on the value of the property.

Is this the house you want to buy or you bought it already and now want to sell?
Either case, there are solutions.

To discuss more you can call me at my cell phone 510-381-2105
Or email me at CharoBhatt@gmail.com

Good luck to you

Charo Bhatt
Web Reference: http://www.HomesByCharo.com
0 votes Thank Flag Link Mon Jun 9, 2008
Hi Raja:

Converting garage into a small studio can add or decrease the property value. If the house is located in a place where parking on the driveway and on street is easily done, then there will not be much problem. However, if it's in a tight parking area and there is no garage, then that might be a problem. It also depends on how easily this can be converted back.

It also depends on the house's floor plan. If adding a small studio will increase desperately needed space. That could be a plus.

For permit issues, as Charo said, if it is done of quality and adhere to building codes, you might just have to pay the penalty and get the permit. Otherwise, you might have to redo the whole thing.

Best,
Sylvia
0 votes Thank Flag Link Sun Jun 8, 2008
Sylvia Barry,…, Real Estate Pro in Novato, CA
MVP'08
Contact
It depends on who is interested in buying it. Typically it is a no no....
Web Reference: http://getprequalified.com
0 votes Thank Flag Link Sun Jun 8, 2008
Hello Charo,
Thanks for the quick and detailed explanation. In this case seller has converted garage into a small studio.
0 votes Thank Flag Link Sun Jun 8, 2008
Hello Raja,

In many homes people make changes with or without permit.

Sellers always have to disclose to buyers if any additions or alterations were done to the original house with or without permit.

For example, home owners may have added a sun room without permit, but they may have done with building code. Such correction done with building code and the structure have been there for a long time (your inspector can tell you how long ago the modification was done), in my opinion it should not affect the value. It may help to sell the home because of some nice feature added to the home. Many years ago home owners used to add rooms even w/o permits. When it’s done or added with permit, then living area of a home is increased in county recorder’s office. When living area is increased, then the property tax will be increased. Some homeowners have done such modifications to avoid extra property taxes but the work may have done with current building code. These kind of changes can help the home sell faster.

Now, if electrical and plumbing lines are modified without permits and visually even a lay man can tell, that it’s poorly done, those kind of changes may endanger the rest of the plumbing and electrical lines in the house. These kinds of changes may affect the value of the property negatively.

In summary, one must see if the work is done poorly or professionally and make the judgment call for the value of the property.

I can help you in your home buying or selling. I have over 17 years of Real Estate and Finance experience and have helped many buyers and sellers.

Please feel free to call me any time at my cell phone at 510-381-2105
Or email me at CharoBhatt@gmail.com
Web Reference: http://www.HomesByCharo.com
0 votes Thank Flag Link Sun Jun 8, 2008
Hello Raja,

In many homes people make changes with or without permit.

Sellers always have to disclose to buyers if any additions or alterations were done
with or without permit to the original house.

For example, home owners may have added a sun room without permit, but they may
have done with the current building code. Such correction done with building code and the structure have been there for a long time (your inspector can tell you how long ago the modification was done), in my opinion, it should not affect the value. It may help to sell the home faster because of some nice feature added to the home. Many years ago home owners used to add rooms even w/o permits. When it’s done or added with permit, then living area of a home is increased in county recorder’s office record. When living area is increased, the property tax would also increase. Some home owners have done such modifications to avoid extra property taxes, but the work is done with current building code. These kind of
changes help the home to sell faster.

Now, for example, if electrical and plumbing lines are modified without permits and visually even a lay man can tell, that it’s poorly done, those kind of changes may endanger the rest of the
Plumbing and electrical lines. These kinds of changes may affect the value of the property negatively.

In summary, one must see if the work is done poorly or professionally and make the judgment call for the value of the property.

I can help you in your home buying or selling. I have over 17 years of Real Estate and
Finance experience.

Please feel free to call me any time at my cell phone at 510-381-2105
Or email me at CharoBhatt@gmail.com
Web Reference: http://www.HomesByCharo.com
0 votes Thank Flag Link Sun Jun 8, 2008
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2015 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer