PART 2 - READ THE POST BELOW THIS ONE BEFORE READING THIS POST:
The second issue is the actual condition of the property and how to proceed from here. I am going to assume that major renovations were done without permits, the city found out and then red-tagged the home. If that is indeed the case, then here are your options:
1. The city has the right to enforce the building code and zoning laws and force the legal owner of the property to remedy all know violations PRIOR to occupancy.
However, donâ€™t expect the bank to provide the remedy. They will not be occupying the property and so will not be forced to remedy any violations. If the existence of the red-tagged items makes it impossible for a buyer to obtain a loan, then, once you back out and the property is back on the market, the bank may clarify that they will only accept cash offers.
2. If your offering price assumed that the renovations and/or additions would be legal and would stay in place, then you can try to renegotiate the price.
You state, â€œthe violations if corrected to code will not be the same house that we made the offered on.â€ You are correct, and this is an unfortunate situation for sure. When you submit your request for a reduction in price, provide extensive documentation from the city and other sources such as Inspection Reports. If the property goes back on the market, the seller will have to disclose everything youâ€™ve provided, which, in turn, could have a very negative impact on the future selling price.
See #5 in the previous section. And donâ€™t hold your breath. Expect the bank to say, â€œTake it or leave it.â€
3. There will not be enough time for you to gather the extensive contractor quotes required to properly assess the cost involved to remedy the situation.
Therefore, to protect yourself, you need to seriously consider walking away.
Since I am a licensed general contractor in addition to being a licensed Realtor, Iâ€™ve written a few posts on this subject that may be helpful:
You TOO Can Purchase A Ticking Time Bomb! One Easy Step!
What Might Your Next Home Purchase Have In Common With The Titanic?
Let me know if you have any other questions.