Home Buying in San Francisco>Question Details

Risottogirl, Home Buyer in San Francisco, CA

We are moving back to SF and will be buying a home. Many places have "unwarranted" space. What is the risk if we do not plan to rent it?

Asked by Risottogirl, San Francisco, CA Sun Apr 24, 2011

Will there be potential problems if we just want to use the space ourselves, as is? For example with HO insurance, etc.? There appear to be thousands of these units in SF. I actually lived in one I think, years ago when I was a student.

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There are a few issues to consider with unwarranted or "illegal" spaces. Most recently, lenders are starting to examine properties more closely for such spaces; it's really important that your loan rep be aware of any unwarranted areas so you can prepare to address them if need be.

Here's a blog post I wrote earlier this year on the subject:
The Ins & Outs of Unwarranted Rooms, Repairs & Remodels
http://www.insidesfre.com/the-ins-and-outs-of-unwarranted-work/

Bottom line is that you want to do thorough inspections on any property you consider purchasing and go from there.

Cheers,
Eileen
Web Reference: http://www.insidesfre.com
1 vote Thank Flag Link Wed Apr 27, 2011
Properties with unwarranted baths an especially kitchens are the ones with the most risk. Sometimes you may find a good deal with such properties if the cost of converting the unwarranted space is not too expensive. You may use the space as is, convert it back or do the work to make it legal. It all depends on the property, the current condition and it's potential.

Oggi Kashi
Paragon Real Estate Group
CA DRE 01844627
Web Reference: http://www.oggikashi.com/
1 vote Thank Flag Link Mon Apr 25, 2011
Depends on the space. If it is a unit with a kitchen and bath it could pose a bigger problem than if it was just a room for example, as the full unit is rentable whether or not you intend to rent it. People have been known to take out the illegal kitchen to reduce the liability of the illegal space. It is rare for the City to have the homeowner take out the illegal unit but it has happened. You should always declare it to your loan office. But also know that if you buy a place with an illegal unit and later that illegal unit becomes a problem you are technically covered by your title insurance.
0 votes Thank Flag Link Sat Apr 30, 2011
Hello,

From my experience, and having seen a lot of unwarranted units...its very rare the city or county will ask you to tear it down. However, that's not to say it has not happened. If you plan to rent it, you run many many risks, too many to count here so best advice is to keep everything legal.
0 votes Thank Flag Link Mon Apr 25, 2011
You're absolutely right about the numerous houses with "unwarranted" units or rooms or baths or any combination of these. Sometimes it is a bit challenging to figure out whether or not som or all of the rooms in any given lower part of the house are original, even after the seller dicloses what they know and you receive the requisite disclosures. I would suggest that you consider looking for those houses that don't have such issues, if you value not having to deal with the possibilities of correcting them, should the City officials learn about the room(s).

Unwarranted rooms are not a problem if the house isn't going to be used as a rental, howver, if that is the intent, then you run a risk of getting cited and fined and required to correct or remove the unwarranted room(s).
0 votes Thank Flag Link Sun Apr 24, 2011
Afternoon,

In my view there are two main issues with unwarranted space:

1. Someone complains/notifies the building department, then an inspector comes out and forces you to remove the unwarranted work, permit it retroactively, and/or fines you. Keep in mind that even if the work was done to code when it was done, albeit without permits, codes change so it may not be up to current codes.

2. It will likely hurt you on resale as most people will not value the space the same as warranted space, unless your broker has negotiated the price accordingly.

In the end, I think you have to evaluate each property on its own merits. I have personally bought and sold a number of buildings for my own account in addition to ones for clients and have extensive experience dealing with the building department and unwarranted space. If you'd like to talk about how to approach this contact info is below.

Best Regards,

Lance King/Owner-Managing Broker
lance@fixedrateproperties.com
415.722.5549
DRE# 01384425
0 votes Thank Flag Link Sun Apr 24, 2011
In my brokerage practice, buyers are informed through disclosures, reports, observation and common sense.
What do you value, living space, location, condition, permitted work, etc
Problems arise when you are not
properly informed and making decision not based on the facts.
Home values are likely discounted
when living space is added without permit. Based on your needs, values
and price point you may be very happy
with a property partially improved without permits. As long as you are informed and possess clarity of your values, the decision to buy or pass becomes easy
Web Reference: http://Redmondretysf.com
0 votes Thank Flag Link Sun Apr 24, 2011
If the unit is currently occupied you will inherit a tenant who is living in an illegal unit and there have been cases where the tenant has asked for a refund of the rent they have paid. I don't know of a case where the tenant has actually collected but, it is a risk to consider.

If the unit is vacant you can hire a contractor to pull a permit to remove the illegal part of unit. You will incur a cost to have floor plans drawn in addition to the cost of the contractor. If there is no internal access between the house and the unit you will most likely be required to remove the shower or bath tub, the kitchen stove will need to be removed and in some cases you might have to remove the kitchen sink and install a smaller bar sink. There are many other variables dependent on the property.
0 votes Thank Flag Link Sun Apr 24, 2011
The seller has to disclose any work they did that was not without a permit/unwarranted. The only risk for you is if you do additional work/remodel in the future, the city may require you to get a permit for any prior work done by former owner without permit. Furthermore, they could require you to remove any work that was done or update to current code.
Please let me know if I can help you with you search.
Sean Solway
Pacific Union
415-971-0985
Web Reference: http://www.sfmarinhomes.com
0 votes Thank Flag Link Sun Apr 24, 2011
The most common issue is that if you get a permit and related inspections for new work at the house, the city may require you to make changes to the unwarranted space. Often homes have a kitchen in an unwarranted in-law and the usual requirement is to remove the kitchen.
0 votes Thank Flag Link Sun Apr 24, 2011
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