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You’re walking through your clients’ home, getting ready to list it for sale, when you see what looks like a makeshift bathroom in the basement. You ask your clients about it and, sure enough, they had a handyman install a sink and toilet down there 10 years ago. Did they ever have permits pulled? If they didn’t, that can come back to haunt them—and you—because it can grind the sale to a halt if a presale inspection is required by your locality or the sales contract requires the seller to provide a certificate of completion to show the work was done to code.
Each municipality establishes its own rules for handling unpermitted work. In my Westchester County, N.Y., market, most municipalities don’t require presale inspections, and sellers are allowed to opt out of a state seller disclosure form if they agree to knock $500 off the sale price, which most sellers do.
In other municipalities, though, like Dobbs Ferry, N.Y., some form of presale inspection by the municipality is mandatory, and these inspections can identify unpermitted work that the seller will need to bring up to code and have a certificate of completion issued before the sale can proceed.
Separate from what your municipality requires, the standard sales contract you use in your state might require the seller to provide a certificate of completion for any work done on the house. Of course, the parties are free to replace the provision with an “as-is” clause, which would allow the sale to go through whether unpermitted work had been identified or not. But that’s a negotiating matter between the buyer and seller.
It’s not your job, as a real estate professional, to inspect a property to determine if there’s unpermitted work. But if, in the course of working with a seller, you see something in the property that raises a red flag, talk with the sellers about it. If they confirm that work was done without the necessary permits, you can recommend that they take proper steps to get the work inspected and, if necessary, brought up to code.
Here are three points to keep in mind when helping your clients avoid problems as they prepare to list their house for sale.
Pay attention to renovations with red flags. Most unpermitted renovations are small scale. Contractors that work on large-scale renovations such as additions typically won’t do the work without pulling the proper permits. But other projects could have cut corners: a sink and toilet rather than a full bathroom in the basement or a window that looks new but doesn’t seal properly.
Ask questions. If something triggers a concern, ask the sellers about it. If they have unpermitted work, or if the work was done by the previous owner and they don’t know whether it was permitted or not, they should consider going to their local building department to see what work requires a permit. Municipalities vary greatly on this. Some require a permit only for major renovations, like a new bathroom. Others require a permit for something as small as adding an electrical outlet. If they discover work done before their time that should have been permitted, sellers should inquire with the city to see whether permits were ever pulled and a certificate of completion issued.
Take proper action. If sellers learn there’s unpermitted work, their best course of action is to make an appointment with a city building inspector, apply for new permits, and, if needed, have the work brought up to the latest code and a certificate of completion issued. One downside: Today’s generally tougher code requirements may make it more costly and cumbersome to have the project pass inspection. It’s always a better idea for home owners to get the proper approvals from a municipality at the time the work is done than to wait until they sell the house years later.