Extensive Un-permmitted Work in house we want to buy, WTD?
We’ve found another house that we would LOVE to own!!!
Its a good size 3-2.5 of ~2100 sq ft on a nice sized lot ~6700sq ft lot built in 1907 of the Colonial revival style. The house is in a better school district (Otis) than our current house and its in an interesting location just a block off the major commercial corridor of Park St. So its a short walk to lots of fun stuff like coffee shops, restaurants, movie theater, etc.
The sellers are asking a not insignificant $865k for the place….
The house layout will work for us with sufficient common area, workshop, storage and a big backyard. Its got a nice new kitchen, new bathrooms, new paint on the exterior and interior, its got a lot new.
What’s the Problem?
The Permit Situation- In other places with un-permittted work we never seriously considered buying them but this time its different.. Holy Friggen Mackerel Is There A F-Ton Of Un-permitted Work!!!! Here is my preliminary list of work that was absolutely done recently without permits.
-
Complete remodel of kitchen: New electrical, new cabinets, new appliances the entire thing is new.
-
Turned a 1/2 bath on the bottom floor into a full bath! This had to of been a gut remodel. The new full bath looks great, but its completely illegal!
-
Turned a closet in the Master Bedroom into a weird little half bath.
-
Completely remodeled the existing full bath on 2nd floor.
-
Finished a basement with drywall, lights, outlets, carpet, etc.
-
Added a sub-panel in basement and did extensive electrical work. Lots of recessed lighting on both floors.
-
Two new NG forced air heating units, one in basement and one in attic.
So, me and the showing agent of course had a ‘nice’ conversation about this….. Unlike some Realtors she was honest enough to put in her own disclosure that extensive work was done on the house without permits. The home owners have not done a disclosure yet….wonder what it’ll say? The Realtor started to use the argument that home-owners are allowed to do their own work if its up to code…ya but you still have to pull permits for it!! And there’s no way that these people did the work themselves and ANY contractor working in Alameda should damn well know that the above work requires permits.
Why ‘No Permits’ is a Bad Thing- The sellers own house inspector called out a TON of issues with the electrical work that NEVER would of passed an actual building inspection. Issues like, scary basic electrician 101 stuff, like double tapping circuit breakers, outlets wired up backwards!?!?!?, over-fusing wires (from the new illegal sub-panel). To the super-dangerous, Federal Pacific Stab-lock main panel that has a 100amp main breaker when it was designed for less. To the over-fusing of the original wiring-putting 30amp fuses where 15-20amp fuses belong!
Also some basic plumbing things like not installing an air-gap for the dishwasher, and running the wrong kind of venting for the kitchen exhaust.
So, the sellers where willing to find ‘professionals’ who where willing to work without permits and surprise, surprise they got sub-standard work!!!
Here’s what’s scary, all the electrical, plumbing that was required to do the above work, its all hidden now, what sort of work is it? I think its safe to say that its probably of the same caliber as the exposed work….which means it could all be a huge ticking time bomb…..
There-in lies the rub….. We want the house but the ‘hidden conditions’ scare the poop outta us…especially for the price they’re asking….What I’m trying to figure out is, whats a reasonable discount for the condition?
Having no idea what exactly the mess we’d be in if we bought the place as is I went down to the building dept to ask them. Without giving the address I explained the work that I thought was done without permits and asked what was the most likely scenario.
The most likely scenario is this- We’d have to write up a set of plans for all the work done and have it ‘verified’. We would have to pay all the permit fees which go like this.
-
Kitchen Remodel- $1400
-
Bath Remodel- $1100
-
Bath Remodel- $1100
-
Bath Remodel- $1100
-
Finished Basement- $2375
-
Sub-panel-elec work – $350
-
Heating-$600
So that’s $8,025 in fees alone. During the course of inspections the inspectors will absolutely require us to open walls to verify hidden conditions…. Now what’s the chance the inspectors are not going to find a ton of below code work? Pretty slim I’d say…So we’ll have to pay to have all the work brought up to code (what’s that going to cost) and everything patched up. That is, if we are even allowed to do the work. The basement work will have to be torn out unless we apply to make it habitable space-which requires a major design review of $2500…
Here’s the great part….if someone finks on the current owners then the city will quadruple the fees required!!! Now that’s starting to become serious money! So the innocent but ignorant new home owners could have a huge bill waiting for them…
So, I’m at a loss as to whats a sane price for the place….What sort of monetary fudge factor needs to be built into the offer to take care of this super large potential can-of-worms?
Anybody have any ideas?
Replies
>>>The sellers own house
>>>The sellers own house inspector called out a TON of issues with the electrical work that NEVER would of passed an actual building inspection.
That alone would cause me to walk away.
The owner made their bed; let them lay in it.
Ya I know its crazy to still want the place even with these existing conditions.
Well, can I say its the wife that REALLY wants the place......
What I'm trying to figure out is if there is a sensible way to put a dollar number to these issues....
Everythings supposed to be negotiable right?
So, the thinking is, what should the discount be to make dealing with this b.s. worthwhile?
Make an offer with a $150,000 discount. Ya never know... Plan on spending the discount on repairs/inspections.
I wouldn't allocate less than $100K to fix it up. And keep in mind that banks will be reluctant to make a loan on it and insurance companies may balk at insuring it until it's fixed up.
Take the 4 x the permit fees, and then a bunch for working on the plumbing and hidden wiring and the cost to recover, mud, and paint to get back to where you are at.
The other posters are right. If the bank knows about this, they'll require it be done for the sale. Maybe request it be done as part of the sale. All other agents will/should have to reveal the defficiencies up front, so that should level the playing field. You can easily check to see if they are doing that as well.
Approach very cautiously and err well on the side of caution. With the unknowns, it's tough to offer. I guess I'd make the owners open it up and correct the defficiencies ... then you potentially could offer full price.
Thanks
I really do appreciate the thoughtful reply.
So this sounds like a potential gem in the rough, as long as you can get it at a steeply discounted price. I would try to exploit the permit-less, negligent owner issue to the fullest. There's no excuse for this kind of BS.
If it works out, please let us know! I love hearing about success stories where diligence triumphs over apathy.
Good luck.
Actually
The house looks fabulous now. if I didn't read the permit history and know somehting about the codes I would think the place was in awesome shape.
I'm not trying to screw anybody here, I'm just trying to not GET screwed and to figure out a sensible way to discount the house value for the conditions.
Yes I am crazy. You have to be to live in the SF bay area and pay these prices...
It may not be a viable idea, but one thing nobody's mention is to just make the list of all the fees, repairs, etc., give it to the seller and tell them you're pay their price, or however close you're willing to come, when all the work and inspections are done. That way the work & inspections will be done & approved when you move in. That also minimizes your cost risk for unanticipated repairs when the walls are opened up for inspections.
Of course they may tell you to shove it, but the bottomline to both seller & buyer are the same whether the work is done before or the price is reduced and the work is done after. That doesn't allow you to earn any sweat equity by doing the repairs yourself, but it does address the risk.
The danger there is that they do a half-assed job on the repairs and then come back and demand that you buy the place at their price.
Not really. The repairs would have to be permitted, meet code, and be inspected. Plus, you'd reserve the right that it is restored to the finish we assume the prospective buyer sees (and likes) right now. Either way, the seller may have to do the work at this point since the defficiencies (i.e. unpermitted work and a few violations) have been revealed ... meaning all realtors should be disclosing this or risk retribution on their licenses. The owner engaged in a risky deal by allowing or doing such extensive work w/out a permit. Now it is beginning to bite them in the *ss.
I agree
Don't let them do the work, they'll take the lowest bid and you'll have no say in how it turns out.
It seems to me that the risk is minimal. The agreement would require that the work has to be complete, permitted and inspected and should require that the final fit , finish, and appearance is at least the quality of the existing structure as seen and approved by the buyer. In my mind, that takes care of all the risks that the buyer can identify beforehand. There's always a risk of something getting by all inspections and reviews, but that's no different than any other purchase. Can you identify all "unknowns", or come up with a cost figure to cover the "unknown unknowns"? By getting the seller to perform the work first, it puts the burden of paying for any additional work that may be required to meet code that is discovered when the walls are opened for inspection or repair on the seller. Don't see how you could claim any other option would be better.
Of course, the seller will select the lowest bidder. Who doesn't? But, it appears that in that environment, the inspections are rather thorough. Around here, I wouldn't accept anything just because it was signed off by one of our BIs. The house, in question, was probably originally built by the lowest bidder, too. What's the difference?
Crooked Realtors
That's the problem.
No seller is going to take a deal like y ou describe becasue they know that there will be a real sucker along shortly who's realtor isn't looking out for their best interests.
What y'all are describing seems reasonable and would probably work in any other market but the SF Bay area....the market here is just not rational....
Existing conditions that would make sensible people run away get ignored cause the place is in a nice school district and the kitchen has fancy counter tops....
Figured that would probably be the case. Totally different market out there. If the market is driving things that way and the sellers are likely to get what they want out of it, sounds like you only have two options. Buy it as is, or walk.
Whichever you do, best of luck.
Seems to me that if the realtors aren't willing to reveal unpermitted work, some of the identified code violations, and the permitting costs to begin a remedy, you can't compete.
Although I suppose you could turn the guy in and force the correction to be started. A hard line, maybe. But maybe shrewd, too?
If the realtor's aren't going to level the playing field, your only choices to compete to get the house is to ensure the conditions are either 1) revealed to all or 2) get corrected if they are really that extensive. Some might think you are obligated to do so since you've become aware of it (that may get some reactions, here).
Problem is, it's very difficult to spec "fit, finish, and appearance" in a precise, enforceable fashion. And it's also probably possible that the HOs could "forget" to get some of the required work done and still sneak it past the inspectors. There be dragons here (and they look a lot like lawyer$).
Part of the information you need is technical, and part is 'political.'
On the technical side, you need to be able to evaluate just how bad the place is, the nature of the violations. HI's tend to cry that the sky is falling if the paint is the wrong shade of white.
If the place is as bad as you fear, then you're looking at a complete gut, maybe even a complete tear-down, in order to most easily fix things.
On the 'political' side, you need to understand the climate of the local town- as in, will they help or hinder your efforts? Do they just want the worst problems fixed, or must it all be brought up to next years' codes? Are there things like 'historical districts' that limit your options? Or, for that matter ... will they even allow you to rebuild if you do a tear-down (zoning, floodplain, etc.)?
Buying property is a decision unlike any other you will ever make. You have to keep a clear focus on what YOUR interests, plans, and abilities are. If it won't work for you, pass it over!
While the seller is free to ask whatever he wants, to my mind there is very little correlation between the value of a specific property and any other statistic (such as the prices of recent sales of "comparable" properties). The sale is the time all those DIY chickens come home to roost - and many a seller has feigned ignorance, or tried to deceive with a nice coat of paint and some spackle. I'd also suggest that it's not worth wasting your time with someone who's listing price is far out of touch with reality.
As someone from a gambling town, I offer this advice: Don't listen to your greed impulse. Never hesitate to walk away.
Yep
I like that, 'the greed impulse'.
I'm not trying to be greedy just trying to not get screwed.
The owners are now going to submit a disclosure listing out all the work they've had done on the house since they're owned it. Guess I'm not the only person who has concerns....
After I get the list I'm going to go through the house with a contractor looking at everything and he's going to write up a quote for fixing everything.(yes I'm paying him to do this).
Then, we'll see how willing the HO's are to deal.
Run- Or Lose!
Let me explain the two reasons you c an't win in this situation .....
The first is that you never come out ahead when dealing with a scoundrel- and there's a scoundrel in this little dance.
The second is that, well, the scoundrel might be YOU. Here's why I say that .....
I learned long ago to NOT get involved, as acontractor, in these situations. The reason is simple: actual work NEVER materializes from all my effort. I've exposed myself to all manner of liability for no reward. My report is treated like holy writ until the deal is closed. Having received the desired discount on the sale price, the new owner suddenly loses any concern over all those 'terible violations.' It's nothing but gamesmanship.
Finally, if the owner has any sense he will simply sell the house 'as is.' You want to l,ater try to establish what he knew / should have known? Even if you get a judgement, lots of luck collecting- the sale money will invariably go into another home, which he can protect with a 'homestead' claim. You can be sure that the scoundrel already knows this.
Buying a home just because it has a nice zip code makes no more sense than buying a car for the paint job.
"Buying a home just because
"Buying a home just because it has a nice zip code makes no more sense than buying a car for the paint job."
Though there a lot of $1M homes on Lake Minnetonka west of Minneapolis have been torn down to put up $5M homes.
Welll
I think wanting to move into a nicer neighborhood and a better gradeschool district has got to be a pretty common reason for folks to pick up and move. Heck, that's why we moved from the ghetto to where we are now. Same house in our old neighborhood would be lucky to fetch half what it would in our current city.
It seems like you've been burned in the past and are a bit bitter on the inspeciton idea? You did get paid for it right?
The professional contractors that I would use for this kind of thing would absolutley charge me enough to make it worth their while given the fact that nothing might come of it. You know the house might fall out of escrow so there'd be no work for them either.
I can only speak for myself in saying that I would defineately have the work done as I would consider it a safety thing. Saving a few bucks means bubkis if you lose half your house in a electrical fire right?"
There is a pretty good chance that all is well with the house, and no major repairs are needed. The inspections are needed, but I don't think the owner will allow walls being opened up etc while the house is on the market. So you are unlikely to get a highly detailed inspection. It seems the only real option would be something legal to correct code violations. I think a lawyer is needed more than an inspector.
My personal thoughts are for you to get the house you own into a more safe and plesant place for everyone, even if it's less than perfect.
But good luck whatever way you go.