Should I buy a code violations property if I get good deal and good location?

Asked by Lakisha, San Jose, CA Fri Jun 22, 2012

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21
Sam Shueh, , San Jose, CA
Tue Jun 26, 2012
Good question. All buyers want a good location at a TERRIFIC PRICE. Often they failed to take the advise of professionals following up.

You get what you paid for and you inherit the problems and headaches.

All these older small homes are so out-of- date to bring to latest code may not worth the trouble. The only thing you purchased is the land value. Land can worth ~125K to 1 Mil in South Bay for an average lot.

The realtor is not a contractor /architect and does not need to know every code. If the buyer wants to pursue it buyer needs to know what he is getting into with the help of a contractor.

I know a 1/1 which became 2/1 at the time of purchase. The buyer does not want to deal with the design and permit waiting made it a 3/2, the authority red tagged wanted to remove all added features and revert to the original 1/1 which still does not meet today's code.

Sam Shueh
Keller Williams Realty
2 votes
Ruth and Per…, Agent, Los Gatos, CA
Sun Jun 24, 2012
Hi Lakisha

Thanks for your question.

Prudent to check if the property has been Red Tagged.
There are some code violations that can be corrected and some that cannot be, in the event
there has been an illegal, non permitted addition of square footage, without plans, approval,
permit filings etc.

One cannot get a permit for that.

If the location is good and you can stomach any issues if a City Code Inspector comes down and
asks you to tear down the illegal structural addition, then more power to you. If you do not think you
will be able to handle the City and the San Jose planning department, then dont.

It come down to how much risk you want to take with your money, and how lucky you are.

Or can you get along with your neighbors, its not uncommon to have Neighbors reporting on
illegal additions and code violations.

Lets say you buy a home with a converted garage in Willow Glen with a kitchen and bath.
You decide to rent the house out to multiple families, creating an increased burden on parking, schools and city utilities such as Sewer, water etc, with an illegal bath.

Now lets say there is a fire, or say your renters were a nuisance, we then know of circumstances that the neighbors report you, and you do get shut down quite quickly.

So it all comes down to also what is the "Use Policy" for such a place.

Good luck
Perry
2 votes
Grace Hanamo…, Agent, Cupertino, CA
Fri Jun 22, 2012
Hi Lakisha:

Like my pal, Charles Butterfield, I'm going to have to applaud Ron Thomas for his witty response. Give the Planning Department a call and find out what speciic issues have been flagged on this home. This will help you evaluate the complexity and expensive of repairs.

I do need to caution you, however, that if the code violation involves an unpermitted addition to the building, it is likely that the planner will tell you that the entire addition may need to be removed. The likelihood that the new addition will require demolition increases with the age of the addition and the square footage. The older the addition, the less likely any code required improvements can be made efficiently or within budget--sometimes it's just cheaper to start from scratch. So while this may seem far-fetched, do keep in mind that the planning department can (and often will) exercise their right to have the unpermitted section of the building torn down and the home restored to its original condition.

So give the planning department a call, and get the information, as Ron so eloquently put it, from the horse's mouth on this one!

Best regards,
Grace Morioka
Area Pro Realty-People's Choice
2 votes
Michelle Car…, Agent, Coppertino, AL
Wed Dec 19, 2012
You've received lots of great answers here. I'm curious-did you buy a home with code violations or not? For a knowledgeable and experienced investor with a contractor team, these can be good deals. If you don't have the personal knowledge, experience or advisors, it can be a headache.

Keep in mind governments are concerned about health and safety-if the violation is obvious from the street anyone may report it. If it concerns the neighbors, they may complain. Most cities don't have the staff to proactively police the area for violations.

However, they have the right to make you either correct it to code or remove it completely. Make sure your "good deal" allows for a risk factor budget to deal with either of these two scenarios.
1 vote
Trung Lam &…, Agent, San Jose, CA
Thu Dec 13, 2012
Great question, but the answer should be depends on what the code violations are. The city person who tagged the property should be able to explain to you exactly what it is. Get bids from licensed contractors, add up all the cost and compare to the future value.
1 vote
CJ Brasiel, Agent, San Jose, CA
Fri Jun 22, 2012
Code violations vary and could be as "simple" as a ceiling fan installed without permit to a complete addition in non-compliance with code and/or without permit. Evaluation of risk not only to health and safety but risk regarding future re-sale, penalty assessment , and/or "red tagged" violation that require removal with or without penalties.

Find out as much as you can about the violation, remedy, and related risk then decide if it is a good deal.

CJ
1 vote
Jose Adame, Agent, San Jose, CA
Fri Jun 22, 2012
I'm sorry Charles, but I don't think we should advise not to buy the house when we don't know anything about these violations. Are their major or minor violations? we don't know.

She is stating that she's getting a good deal but the definition of a "good deal" changes person to person.

The fact of the matter is that we don't have enough information to advise Lakisha if she should or not buy the property.

I just had a client who recently bought a property with code violations but these violations which appeared to be major to the bank were easily taken care of. I have had other client investors bought other properties with violations so it all depends... Sometimes buyers don't have the funds to correct any code violations so asking for code violations to be corrected before close of escrow could not be possible.

Just a thought and I greatly respect your contributions.

JOSE ADAME
Real Estate Broker, Owner and Founder
AMERILAND REAL ESTATE SERVICES
iNFO@JoseAdame.com

* Certified Foreclosure, Bank Onwed, REO Specialist
* Certified Short Sale Professional
* Certified Mortgage Planner Professional

Expert In The Areas Of:
* Seller's Representation
* Mortgages, Home Loans
* Bank Foreclosures, Bank Owned, REOs
* Shortsales
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* Mortgage Planning
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http://www.JoseAdame.com
1 vote
Terri Vellios, Agent, Campbell, CA
Fri Jun 22, 2012
Lakisha,

If you are under contract be careful about going to the building department. If you are using the C.A.R. contract, page 4, PH 10, A states; Buyer shall...neither make nor cause to be made (ii) inspections by any governmental building or zoning inspector or government employee, unless required by law.

Code violations can cause a property to be red-tagged and that could mean no one can move into it until the defaults are repaired. The repairs could be minor or significant.

I was once involved in a transaction where there was a non-permitted improvement. A city building inspector came through the open house and red-tagged the building. The cost to remove the addition was over $30,000 and the improvement - which the buyer felt was a benefit - would no longer be allowed. The buyer was very disappointed but was willing to take on the work at a different purchase price, however the seller decided not to sell.

This is where your agent earns your business.
Web Reference:  http://www.terrivellios.com
1 vote
Andrea Wince…, Agent, Milpitas, CA
Fri Jun 22, 2012
Hello Lakisha, specifically, what are the code violations? This will help us to offer our opinion.
1 vote
Ron Thomas, Agent, Fresno, CA
Fri Jun 22, 2012
That would depend heavily upon what you think the violations are:
If they converted a garage or enclosed a back porch, you may only have a problem with asking for an inspection and a certification.
Possibly, they will require you to have a licensed electrician do some rewiring and then an inspection.
It depends:

Why not pay a visit to the County Building Office and ask the horse's mouth instead of the other end.

Good luck and may God bless
1 vote
Bill Eckler, Agent, Venice, FL
Tue Jul 22, 2014
This is a dated but still valid question.....

One should be very careful when it comes to purchasing property that have known code violations. While some are minor and require little to no owner attention there are also those that are very major and could prevent the buyer from obtaining a "certficate of occupancy" until these diffencies are corrected and approved.

Just keeping it real!

Bill
0 votes
Sam Shueh, , San Jose, CA
Mon Jul 21, 2014
Good question. All buyers want a good location at a TERRIFIC PRICE. Often they failed to take the advise of professionals following up.

You get what you paid for and you inherit the problems and headaches.

All these older small homes are so out-of- date to bring to latest code may not worth the trouble. The only thing you purchased is the land value. Land can worth ~125K to 1 Mil in South Bay for an average lot.

The realtor is not a contractor /architect and does not need to know every code. If the buyer wants to pursue it buyer needs to know what he is getting into with the help of a contractor.

I know a 1/1 which became 2/1 at the time of purchase. The buyer does not want to deal with the design and permit waiting made it a 3/2, the authority red tagged wanted to remove all added features and revert to the original 1/1 which still does not meet today's code.

Sam Shueh
Keller Williams Realty

http://x299322.yourkwagent.com/
0 votes
Steve Quinta…, Agent, Albuquerque, NM
Sat Jul 19, 2014
As long as making the corrections are within your scope of expertise, sure.
0 votes
will a lender finance a home that a bathroom was added without a permit? Conventional financing?
Flag Sun Sep 18, 2016
Sam Shueh, , San Jose, CA
Sat Jul 19, 2014
stay away. Nothing but headaches.
0 votes
Trung Lam &…, Agent, San Jose, CA
Thu May 16, 2013
Absolutely! Secure the contract, then find out exactly the cost of all the violations. Call the person on the tag and ask to meet he or she in person and have them point out the violations. Bring a contractor with you to the meeting is always a plus.

As a real estate investor/broker, our team loves acquiring properties with violations :)
0 votes
Olamas, , Miami, FL
Sun Dec 9, 2012
We are architects and contractors that specialize in correcting code violations in South Florida and we see amazing deals every day based on violations. These violations can serve as great leverage in negotiating and they tend to be relatively low in cost compared to the savings you can have. Have a contractor visit the property, it'll be we'll worth the nominal fee he'll charge.
Orlando Lamas, R.A.
http://www.FixMyCodeViolation.com
0 votes
Ruth and Per…, Agent, Los Gatos, CA
Thu Jun 28, 2012
Hi Lakisha:

I do have an update for you for both Town Homes and Single Family homes:

http://tinyurl.com/835kgrf [Open in new window]

http://tinyurl.com/6wplqe2 [Open in new window]

Hope this helps in firming up your decision.

Perry
Web Reference:  http://www.ruthandperry.com/
0 votes
Shirley Cheng, Agent, San Jose, CA
Mon Jun 25, 2012
Just make sure it will get appraised at that value. I think that's a big issue
0 votes
charles butt…, Agent, san jose, CA
Fri Jun 22, 2012
Thank you, Mr. Adame: :

I stand corrected.

I greatly admire your contributions.

I agree that you are correct.

Without knowing the specific code violations, I agree it is not possible to give sound advice with respect to the issue of whether or not to purchase a property with code violations.
0 votes
charles butt…, Agent, san jose, CA
Fri Jun 22, 2012
Thank you, Lakisha:

You have a very good recommendation from Ron Thomas below:

In addition, fixing up a property with code violations, depending on what the code violations are, can be a very time consuming, frustarting process.

At the very least, make absolutely certain that you know exactly what the code violations are, and make a trip to The City Building Department and make an appointment to sit down with a City Building inspector and ask what the City will require to bring the property up to code.

Make Certain that you get a very good, thorough, property inspection report. That will help you immensly.

Some code violations are easy to fix, but many code violations are very difficult and aggravating and time consuming to fix.

Unless you are very familiar with the process. and have some extra time on your hands, and unless you know a very good, licensed contractor, who will work with you to bring the property up to code, I do not recommend that you buy a property with code violations, unless those code violations are corrected prior to the close of escrow.

.
0 votes
Cindy Davis, Agent, San Diego, CA
Fri Jun 22, 2012
I agree with some of the below comments. In addition, I might suggest writing into the offer that the seller bring all code violations up to date.
0 votes
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