Author Topic: Need Help regarding selling home - with illegal/unpermitted room extension.  (Read 3671 times)

svndezafrohman

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Need advise on selling a home with illegal/unpermitted room extension.
I received this house from my parents and they told me the extended living room was unpermitted.
I am thinking of selling the house within the next several year, so i need advise on how to go about maximizing the home's value.

Location: Orange County
Size of Living Room Extension: ~500 SQ Ft.
Home size without extension: 1300 SQ FT.

I read up that some cities give retroactive permits, but I don't want to go about this process if in conclusion I need to break down the living room.

What can I do?
Is it easy to obtain retroactive permits / inspections?
How much am I looking at for the permits / property tax penalities / inspection etc.

What is the cost/benefits of disclosing this?
Is there any other information I am missing for you guys to help?? Let me know and I will update.

undercover

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Re: Need Help regarding selling home - with illegal/unpermitted room extension.
« Reply #1 on: September 24, 2016, 07:20:40 AM »
Call the city?

waltworks

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Re: Need Help regarding selling home - with illegal/unpermitted room extension.
« Reply #2 on: September 24, 2016, 07:28:36 PM »
I would avoid involving the city and just disclose the information to potential buyers.

-W

Shane

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Re: Need Help regarding selling home - with illegal/unpermitted room extension.
« Reply #3 on: September 24, 2016, 10:27:20 PM »
Whether it's worth it to go through the trouble of getting "as built" permits for your LR depends on where you live, how well the addition was constructed (is it "to code?"), and whether having the extra square footage permitted will add value ($) to your property.

Even if you're not planning on selling the house for a few years, it wouldn't hurt to interview a few realtors and ask for their advice now. Just be up front with them when you contact them. You may also benefit from paying for an appraisal. An appraiser could tell you:

1) How much would the property be worth if you do nothing other than disclose to potential buyers that there is an unpermitted addition?

2) How much would the property be worth if you went to the trouble and expense of getting after the fact permits for the addition?

If the house would be worth about the same whether the LR is permitted or not, then there's no sense going to any trouble to get the permits. If the house would be worth considerably more if all the square footage were permitted, then it may be worth it to consult some general contractors to get their advice on how difficult it would be and how much they would charge you to get the place permitted. If the two numbers are close, probably it's not worth stirring up what could end up being a lot of trouble by alerting the bureaucrats to the fact that your home contains unpermitted additions.

My wife and I just sold a home that had ~700sqft of unpermitted additions. We thought about going through the process of getting after the fact permits for the additions, as they were all built to code or better, but it turned out that it probably wouldn't have been worth it in our case. Even without the permits our home sold for the same price as the last highest sale in our neighborhood in the previous 6 months.

If we had gotten the permits, our realtor said, we could probably have asked and maybe have gotten a little more money, but our place would have been harder to sell and it would probably have taken longer because we would have been asking buyers to pay more than any other property in our neighborhood had sold for in the recent past. Our realtor recommended we just fully disclose everything to potential buyers and not bother getting any permits, which in hindsight turned out to be good advice. The buyers loved our house and were fine with the fact that part of the house was unpermitted. They had an appraiser come in, and I'm sure he told them that every part of the house, permitted and unpermitted, was extremely well built, actually over built, and that it was worth the price we were asking. Our house was only on the market for about 3 weeks before we got an all cash offer that was within about 5% of our asking price.

svndezafrohman

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Re: Need Help regarding selling home - with illegal/unpermitted room extension.
« Reply #4 on: September 25, 2016, 08:34:30 AM »
Thank you Shane for the details!
Yes i think i will call some appraisers / realtors to get an idea on home's value and see if all this is worth the hassle.
If not, then i'll just sell with the disclosure and hopefully everything will go smoothly like you.


Shane

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Re: Need Help regarding selling home - with illegal/unpermitted room extension.
« Reply #5 on: September 25, 2016, 01:16:20 PM »
Thank you Shane for the details!
Yes i think i will call some appraisers / realtors to get an idea on home's value and see if all this is worth the hassle.
If not, then i'll just sell with the disclosure and hopefully everything will go smoothly like you.

Good luck!

LaineyAZ

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Re: Need Help regarding selling home - with illegal/unpermitted room extension.
« Reply #6 on: September 25, 2016, 08:00:59 PM »
I had a similar situation here in Phoenix.  Previous owner had built a small addition, and I bought the house 20 years ago with no problems.  Fast forward to 5 years ago when I went for a refinance, and the appraiser said, "hey, the dimensions of the house don't match what's on record with the City."   
Now I can't get a mortgagor to even talk to me unless I clear this up, so I had to get new drawings made and filed with the City.  Then I had to go in-person to the zoning office to see if they would approve it retroactively.  Turns out there was a new regulation which, luckily for me, grandfathered anything done 15+ years ago.  However the zoning officer still insisted on an in-person city inspector to do a final signoff. 

Bottom line is I spent about $1,500 to clear this up, and only then was I able to proceed with a refinance. 

svndezafrohman

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Re: Need Help regarding selling home - with illegal/unpermitted room extension.
« Reply #7 on: September 26, 2016, 10:19:46 AM »
I had a similar situation here in Phoenix.  Previous owner had built a small addition, and I bought the house 20 years ago with no problems.  Fast forward to 5 years ago when I went for a refinance, and the appraiser said, "hey, the dimensions of the house don't match what's on record with the City."   
Now I can't get a mortgagor to even talk to me unless I clear this up, so I had to get new drawings made and filed with the City.  Then I had to go in-person to the zoning office to see if they would approve it retroactively.  Turns out there was a new regulation which, luckily for me, grandfathered anything done 15+ years ago.  However the zoning officer still insisted on an in-person city inspector to do a final signoff. 

Bottom line is I spent about $1,500 to clear this up, and only then was I able to proceed with a refinance. 

Quick question LaineyAZ.

1. When the inspector was checking it, did you have to open up any walls or break anything down?
2. You didn't get hit with any retroactive property tax hits/penalty?
3. How long did the whole process for you take to get the final signoff?

Thanks

LaineyAZ

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Re: Need Help regarding selling home - with illegal/unpermitted room extension.
« Reply #8 on: September 28, 2016, 06:58:44 AM »
No walls had to be broken into, he just did a walk around and looked at things structurally.  Honestly it took about 5-10 minutes.  Then he signed off the paperwork right in front of me.  That's the golden ticket, which then officially changed the house dimensions with the county recorder and the city plan.

No penalties of any kind because a) the addition was grandfathered in, and b) the City has this home inspection program specifically for homeowners in my situation.  Basically they want to clear up the records vs. making your life difficult by forcing you to pay extra costs.  I think the inspector costs $150? and of course I had to pay for the new house plans myself and submit 2 full-size blueprints to the city - all of that was about $1,000. 

If you're selling to an all-cash buyer none of this would make any difference, but if, like most buyers, yours will be needing a mortgage which also requires an appraisal, then that's where any unpermitted work can become a roadblock.

Another Reader

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Re: Need Help regarding selling home - with illegal/unpermitted room extension.
« Reply #9 on: September 28, 2016, 07:06:14 AM »
I had a similar situation here in Phoenix.  Previous owner had built a small addition, and I bought the house 20 years ago with no problems.  Fast forward to 5 years ago when I went for a refinance, and the appraiser said, "hey, the dimensions of the house don't match what's on record with the City."   
Now I can't get a mortgagor to even talk to me unless I clear this up, so I had to get new drawings made and filed with the City.  Then I had to go in-person to the zoning office to see if they would approve it retroactively.  Turns out there was a new regulation which, luckily for me, grandfathered anything done 15+ years ago.  However the zoning officer still insisted on an in-person city inspector to do a final signoff. 

Bottom line is I spent about $1,500 to clear this up, and only then was I able to proceed with a refinance.

Are you in Phoenix proper or a suburb?  I have found Tempe to be exceptionally difficult to deal with, especially on a carport conversion to a garage.

LaineyAZ

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Re: Need Help regarding selling home - with illegal/unpermitted room extension.
« Reply #10 on: September 28, 2016, 07:15:54 AM »
Yes, I'm within the City of Phoenix.  I wonder if my resolution was a little easier because of the addition having been done 15+ years ago which meant it was grandfathered in unless they could see serious issues with it.
In your case you're starting from scratch.  I have to say I did see a definite "attitude" with the initial City of Phoenix planning approval guy.  It seemed they like to start from "No."  He was very slow on the computer search (e.g., checking my home on google maps, then comparing it with a google image of 10 years ago to make sure I wasn't lying that I was not the one who had added the addition - he seemed surprised to find out I wasn't lying.) 
At another point there was a small group of protestors in the City Hall lobby who were chanting about something, and he rolled his eyes and said to me "they need to go back home.'  He was wanting me to agree, but  I kept a neutral game face and wasn't going to get drawn into any drama. 
At one point he turned to his co-worker and joked about the fact that applicants have been known to cry, swear, etc. in front of them and it doesn't faze them (in fact, the way he said it made it seem he almost enjoyed that.)  Finally he couldn't seem to find a reason to not approve my plan and almost reluctantly agreed.

So maybe people who staff these positions are a little cynical or even borderline sadistic?  I'm sure they've seen enough fraudsters, but IMO that makes them over-react to a simple request like a carport to garage conversion.

Another Reader

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Re: Need Help regarding selling home - with illegal/unpermitted room extension.
« Reply #11 on: September 28, 2016, 01:11:41 PM »
My experience was a number of years ago.  The conversion was done over 30 years prior to my involvement with the property at a time when not many people pulled permits for converting carports.  My feeling was that Tempe used these as an opportunity to make extra revenue.  I believe we sold the house, which was a flip, with a credit for the conversion approval, which was not insignificant.

ETA: I think the Arizona cities caught on to the revenue scheme from all the Californians that were moving in, because that's SOP over here.  One of the Tempe agents I knew walked several through in the late 90's and early 2000's.  A basic drawing, a  permit, and an inspection were the necessary steps.  Less than a week and $300-$500. 
« Last Edit: September 28, 2016, 01:21:32 PM by Another Reader »