Be cautious when buying a home with unpermitted work.
buying, Buying a Home, For Sale, Home Owner, Selling a Home

4 Things to Know About Buying Homes with Unpermitted Work

When you’re looking for your dream home, the thought of unpermitted work might not be front and center for you. But updates that haven’t gone through the permitting process come with significant potential headaches. 

If you’re thinking about buying or selling your home, reach out to Julia Monaghan Real Estate. Our expert team can help you find what you’re looking for and avoid housing pitfalls. With vast experience helping clients buy and sell older homes, we understand what you need to watch for in this process. 

Whether you’re looking within Portland city limits or farther out in places like West Linn or Happy Valley, let’s connect today.  

What Is Unpermitted Work?

Each city and county can have regulations surrounding home construction, repairs, or improvements. Depending on the project, the homeowner or contractor must apply for the appropriate permit. 

Unpermitted work is something to be wary of when buying or selling a home.

In Portland, you need a permit in hand before building any structure on your property and before you make any significant changes. A few examples of when you need a permit include:

  • Enclosing a Carport
  • Adding or Removing a Wall
  • Finishing the Attic
  • Adding a Shed
  • Planting or Removing a Tree
  • Adding a Bathroom
  • Installing New Windows

The complete list is much longer, so it’s generally safest to assume that you need a permit for most projects. However, the reality is that many homeowners bypass the permit process, intentionally or not.

If a homeowner decides to take down a wall inside their house, the outside world is unlikely to notice. They might choose not to get a permit because of the time or expense involved. Or they simply might not know any better. 

Does it really matter if they did the updates without securing legal permits? There are a few things you should consider before taking ownership of a home with unpermitted work.

1. You Don’t Know What’s Underneath

Plumbing and electrical work, in particular, can create problems if there aren't permits in place.

There’s more than one way to plumb a toilet, add an electrical outlet, or replace a floor. And many of the ways are wrong.

If you’ve been touring homes for sale, you’ve probably seen some amateur work. Have you ever seen a click-vinyl floor that didn’t quite lay right? 

Now, imagine what sort of work might be hiding behind the sheetrock. Many DIY projects conclude with the statement, “That’s good enough.” If the work isn’t visible, homeowner might get to “good enough” even sooner.

When no permits are issued, the improvement, repair, or upgrade might not follow the city or county’s building codes. The work might not last, or it might not be safe.

2. Unpermitted Work Could Impact Home Value and Lending

Sellers are legally obligated to disclose unpermitted work to buyers, but this doesn’t always happen. Sometimes, the seller doesn’t know about it because the previous owner never told them. 

Many sellers don't know that they have to disclose unpermitted work to potential buyers.

And if the seller is trying to do a for-sale-by-owner, they might not know they have to disclose this information. (Pro tip: Always work with an expert agent to make sure you check off all these legal requirements as a seller!)

Unpermitted additions will have changed the square footage of the home without changing it in legal tax records. During an appraisal, this discrepancy could stop the lender from approving the loan until permits are in place. Or, they may exclude the unpermitted square footage from their assessment, lowering the property value.

3. Your Homeowners Insurance Might Not Cover Unpermitted Additions

We all hope we never need to use our insurance, but we purchase it to protect ourselves from potentially significant financial losses. However, if a problem arises in your unpermitted space, your insurance company may not cover the damages.

Unpermitted work can cause problems if you ever need to make an insurance claim.

Some examples that a homeowners policy might not cover include:

  • An electrical fire started by unpermitted wiring
  • Leaks or flooding due to unpermitted plumbing
  • Windstorm damage to an unpermitted shed
  • Medical claims arising from injuries in unpermitted areas, such as a deck

4. You Assume the Risks Once You Purchase the Home

If you choose to buy the home, you will carry the risks of the unpermitted work. Even if you are content to live with the updates, the city may not let you. Local authorities can demand to inspect the property if an inspector notices the work for any reason or a cranky neighbor turns you in. This isn’t common, but it does happen.

To get an inspection and permit after the project is complete, you may have to undo some of the unpermitted work. Depending on the scope of the project, this step could be costly. Inspectors may need you to remove drywall to see studs or plumbing. Or they may require you to dig out your landscaping so they can measure your footings.  

Sometimes, homeowners have to undo work that didn't have a permit.

You’ll be responsible for the cost of making the property inspectable. Then you’ll have the expense of putting the house back in order. You’ll also need to purchase the inspection permit and pay any fines or penalties for the unpermitted work.

Another uncommon but possible situation is that the lender could call in the loan if they learn about unpermitted additions to the property. This is rare, but it is something homeowners need to be aware of as a possibility.

How Do You Know If There’s Unpermitted Work?

Legally, the seller must provide information about any upgrades or additions, including permit and warranty information. But as we mentioned, buyers can’t rely on that being the whole truth and nothing but the truth.

A home inspection is a critical step when buying a house.

It is always a good idea to get a home inspection before buying a property. Your home inspector is likely to spot any concerning upgrades or repairs. If there is a question about any work they see, they may get a copy of the blueprint from the city. This allows the inspector to compare the city’s information with the existing structure to spot discrepancies.

The listed square footage can be another clue. If the city records say the home is 1200 square feet, but building measurements show 1600, there may be an undocumented addition. If the property is within Portland, OR, city limits, you may be able to look up its permit history online.

Your real estate agent will also help protect you. They will walk you through any disclosures made by the seller and give you realistic guidance about how to approach a sale with unpermitted work.

Options for Dealing with Uninspected Work

Negotiating a lower sale price might be an options if there is unpermitted work.

If you learn that the property you’re interested in has unpermitted work, you have a few options. 

  1. Ask the seller to get the appropriate permits. It may be easier for the seller to obtain permits because they know what work was done and who did it. Often, this process is fairly simple.
  2. Make an offer with the knowledge that you will have risks or expenses related to fixing this issue. The seller may be unwilling to do anything on their end to address it. However, they may be willing to lower the sale price.
  3. Accept the problems that come with the home and make an offer. Some buyers decide that a property has enough appeal to overlook these potential headaches. 
  4. Walk away. A seller’s market may tempt buyers to grab any property they can. But there will always be other houses for sale. If you can’t reach an agreement you feel good about, you might want to pass on this home.

When You’re Ready to Move, We’re Ready to Help

Whether you’re upsizing, downsizing, or just need a change, Julia Monaghan Real Estate is here for you. Our expert team is happy to help you buy or sell throughout the Portland Metro area, and we’ll move at whatever pace suits you. Connect with us today to learn more. 

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