Buying or Selling Real Estate With Unpermitted Changes: Here's What You're Up Against

Buying or selling real estate with unpermitted changes can be a complicated and challenging process. Unpermitted alterations or additions made to a property can create legal and financial issues for both the seller and the buyer. Here’s what can happen when you sell a house with unpermitted changes.

1. Delayed or Failed Home Inspection: When selling a house, it's common for buyers to conduct a home inspection. Unpermitted changes are likely to be discovered during this process. Depending on the severity of the changes, the inspection report might raise concerns for the buyer, potentially causing delays or even leading to the cancellation of the sale.

2. Negotiation Challenges: Unpermitted changes can lead to negotiation challenges. Buyers may demand a reduction in the sale price to cover the costs of legalizing the changes or requiring the seller to conduct necessary repairs to bring the property up to code. This negotiation process can become stressful and may result in a less favorable deal for the seller, and can easily lead to a deal falling through.

3. Legal Consequences: Selling a house with unpermitted changes could open the door to legal consequences. If the new owner discovers these changes after the sale, they might take legal action against the seller for nondisclosure. This can lead to costly legal battles and potential financial penalties.

4. Increased Liability: Unpermitted changes could increase the seller's liability. If the new owner encounters problems related to these changes, such as structural issues or electrical hazards, the seller could be held responsible, leading to legal disputes and potential financial losses.

5. Difficulty in Securing Financing: Buyers seeking a mortgage loan may encounter challenges when trying to finance a property with unpermitted changes. Lenders are often reluctant to provide loans for properties with potential legal issues. This limitation can significantly reduce the pool of potential buyers, making it harder to sell the house.

6. Impact on Property Value: Unpermitted changes can negatively impact the property's appraised value. Appraisers consider these alterations when determining the house's worth, and unpermitted changes can result in a lower valuation. This decrease in value can further complicate the selling process and affect the final sale price.

7. Costly Remediation: To rectify the situation, the seller might need to obtain permits and bring the changes up to code. This process can be time-consuming and costly, involving inspections, potential fines, and hiring contractors to redo the work properly. The financial burden falls on the seller, impacting their overall profit from the sale.

Bottom Line. Just get the permit before you do work to your home! Selling a house with unpermitted changes can lead to a host of challenges and complications. It's essential for both buyers and sellers to be aware of these issues and to address them transparently and proactively. Sellers should consider legalizing any unpermitted changes before listing their property to avoid potential problems and ensure a smooth, successful sale. Consulting with a real estate professional and legal expert can provide valuable guidance in navigating this complex situation.