Buying a house whether to rent or flip is exciting. But it can come with unexpected expenses if you aren’t careful.
If you don’t check the permits on a house, you may not know if the home has unpermitted work done to it. Even if the previous owner took out permits, if he/she didn’t close the permits (get final approval from the city) the permits remain open and can ultimately affect your investment.
All of these issues could halt any construction plans you had for the home and cost you much more money than intended on your investment. This is our quick guide to checking permits on a house:
Why Check Permits On A House?
Open permits don’t go away when the owner sells the house. They stay with the property, no matter how many times it changes hands.
What does this mean for you as an investor?
First, you may be on the hook for any penalties the owner incurred. Even though it wasn’t you that pulled the permits, they are tied to your property so they are now your responsibility. This could increase the cost of fixing the home. If you don’t have enough money for extra expenses, it could turn you upside down on your investment.
This is why it’s better to go into the property acquisition process knowing which permits are on the home.
How To Check Permits On A House
Checking permits on a house should be one of the first steps you do once you express interest in a home. A few ways to do it include:
- Online – Check if the city where the property is located has an online portal, most do. You can pull the home’s permits in the portal and determine if they are open or closed.
- Phone – If the city doesn’t have an online portal, call the correct department and ask how they prefer you pull the permits.
- Visit town hall – If all else fails, visit the city hall department in person and ask about any open permits on the property.
The Risk Of Not Checking Permits On A House
As we said above, there are many reasons to check permits on a house, but the risks for you could be immense including:
- You may have a hard time selling the house.
If you bought a home and an open permit slipped through the cracks, it may not slip through a second time. If you bought the home intending to flip it only to find out there is an unresolved permit on it, there may be delays in selling the home.
- The title company may not insure the home.
While title companies don’t pull permits, if they find out some other way that there are open permits, they may not insure the property. Title companies only want to insure properties that are free and clear of any financial liability. An open permit signifies financial risk and a title company may not take the risk.
- You may have to finish the work
Even if the permits are years old, if the city doesn’t approve of the work completed, you may have to pay to have the work completed or redone to the city’s standards. This could put you over budget especially if the renovations are extensive.
- You may need to remove the work.
Depending on the issues with the work, the city may require you to remove the work. This requires hiring contractors to do the work right and potentially fixing any destruction it causes. This could delay your progress fixing up the home and hurt your profits.
What To Do With An Open Permit
If you find an open permit on the home you bought, there are a few things you can do.
- Talk to the building code department.
The building code department may be able to point you in the right direction, especially if the permits weren’t for anything big. While they’ll need the permit closed, it could take you only a little work and time to get it fixed.
- Locate the contractor.
If the work is extensive and isn’t something you can handle quickly, you may want to find the original contractor. He’d be the best person to figure out how to close the permit since he did the original work. If the contractor isn’t in business or isn’t responsive, you may have to hire someone else.
- Work closely with your building inspector.
If you can’t get the original contractor, find out what else you can do by talking to the building inspector. He may have some ideas to help you close the permit quickly and with as little expense as possible.
Pull Permits Before You Buy A House
The best situation is to pull permits before you buy a house. No one wants unexpected expenses when they buy a house, especially when it’s an investment.
Do the legwork to find out if any work is outstanding. If it is, find out the extent of it. Sometimes it’s something small and you can clear it up quickly. If the home really interests you, it may be worth it.
If you pull the permits and the work is extensive or the contractor did a shady job and it will take too much money and time to fix the issue, you may be better off skipping it.
Permits Are Helpful
Permits are not meant to be a hassle. They are there to protect homeowners and anyone buying the home. Permits make sure the work is done right and that contractors aren’t taking advantage of homeowners and their money.
While it’s not pleasant to find open permits, they are fixable with the right steps. If you don’t check for permits beforehand, just know that you may have some more administrative and physical work on your hands if open permits turn up when you start working on the home. Try and get them out of the way before they become a problem.