Selling a house with unauthorized work

There is a certain satisfaction when you start a project yourself: bringing in the wood, doing the job with your own two hands. But when it’s time to sell that house and the work you did (or had done) never got the official green light from the city, things probably get a little more complicated.

That said, don’t worry; you still have options. Whether you’re switching from a house in Santa Cruz or posting your Boston house for saleyou can sell your house with unauthorized work – as long as you do it the right way.

What is unauthorized work?

Unauthorized work means any renovation, repair or addition to a property that is legally required to do so permit but it is done without. This could be as simple as a patio extension, or as grand as converting a garage into a bedroom or even adding a bathroom. Like Arnie Gess, president of Construction links networkexplains: “Skipping permits can save time upfront, but it can pose challenges when selling your home. From failed inspections to legal risks, the consequences can be costly.”

Maybe you bought the house with the unlawful work has already been done. Maybe you’ve done it yourself and thought “good enough” was good enough. Be that as it may, if the local building authority hasn’t registered it, it’s not technically sound, even if it’s built to last.

Can you sell a house with unauthorized work?

Yes, that’s possible sell a house with unauthorized work. There is no law that says a house with unauthorized work cannot be sold. But there are steps, risks and revelations that come into play. Like Glenn Stein, broker-owner of Real estate managers in the villagesit states: “Unauthorized work is a silent deal-killer. The moment it shows up in an inspection report, the buyer gets the upper hand. The smart seller confronts it before going to market, because in real estate, control is everything, and once you lose it, you rarely get it back.”

These are the most common problems sellers encounter:

• Disclosure Requirements: You are legally obligated to inform potential buyers of known unauthorized work. Trying to hide it is not an option.
• Lender Hesitation: If a buyer has one mortgagethe unauthorized work can deter lenders. They don’t like loose ends, and they definitely don’t want to borrow on a house that could involve future liability.
• Rating issues: Appraisers often cannot include unauthorized square footage in the home’s appraisal. That sweet basement bar you built? In their eyes, worth nothing unless it is legal.
• Insurance risks: If something goes wrong with that unauthorized addition, insurance may not cover it. Something like an electrical fire in your DIY attic office is entirely your responsibility. Mike LaFirenza, CEO of Construction coveragesays: “The risk comes with unauthorized construction, electrical or plumbing work. These can distort valuations, reduce the buyer pool and cause problems with lenders. Most importantly, if something goes wrong after the sale, such as an electrical fire or structural failure, you could face serious legal claims if the work is not fully disclosed.”

Assess the situation and document everything

Before you do anything, take stock of your situation as a whole.

• Get data from the city or state: Your local building department can tell you what permits have been issued. If there is no data for that second floor or bathroom, it’s time to start asking questions.
• Request an appraisal from a contractor: A licensed contractor can assess whether the unauthorized work was performed according to code, even if it has not been inspected. If it’s solid, you’ll have some ammunition to reassure buyers.
• Find a home inspector: A thorough one home inspectioneven paying upfront can reduce buyer anxiety later. Think of it like looking up your route before starting a long walk: you want to know what to expect.

Should you fix it, allow it, or sell it as is?

Once you’ve assessed the situation, there are a number of ways you can proceed. None of them are pain free.

1. Retroactive permit

In some jurisdictions you can apply for a retroactive permit or a retrospective permit. This is often the best route if you have done high quality work and have the time to deal with local government.

You will probably need the following:

• Plans drawn up by an architect or engineer
• Inspections (which may involve opening walls or ceilings)
• Financial reserves to cover compensation and any fines

It’s not always easy, but retroactive permits allow you to sell with fewer complications.

2. Rip it out or fix it in code

In some cases, retroactive permits are not allowed or cause more trouble than they are worth. If the the work is sloppy or dangerousyou may have no choice but to put it in the code or remove it altogether. Jody Costello from Contractors from hell explains it clearly by saying, “Without the required local inspections by the city or municipality, it is easy for the contractor to deem their work acceptable or comply with current regulations.” Fixing this costs money. Possibly a lot. But it can make sales smoother and safer.

3. Sell as is and make everything public

This is the path of least resistance, and it is legal as long as you are not deliberately hiding anything. Announce the work in writing. Spell it out. Be honest and as clear as possible.

Buyers will still bite if the price is right or the work looks good. But you may want to limit yourself to cash buyers or investors who don’t need financing and are used to fixer-uppers.

Should you price a house with unauthorized work lower?

Usually yes. Homes with unauthorized work generally sell for less than comparable homes that are fully permitted. Appraisers do not take unauthorized damage into account square metersand some buyers don’t want to deal with the extra risk.

That said, if the work is well done and visible, you can still get close to market value, especially in a hot market where buyers are willing to overlook problems. Be prepared: Every negotiation will likely come back to the same question: “What happens if the city finds out?”

Unless you have resolved the problem beforehand, the answer is usually that the buyer assumes the risk.

Don’t skip the paperwork

Find a Redfin broker who knows how to deal with things like this. You need clean, thorough disclosures. You may even want to consult a real estate attorney, especially if there is a lot of money at stake or you are dealing with serious violations.

Oren Sofrin, owner of EagleCashBuyers.com sums it up best by advising, “The best approach is always full disclosure on the seller’s disclosure form, pricing the home accordingly (often lower to take into account the buyer’s concerns), or pursuing retroactive permits where possible to get the job done. This reduces liability and can make the property more attractive to traditional buyers.” Your goal is not to hide the past. It’s about selling your house fairly and preventing problems later.

You can sell a house with unauthorized work

Selling a house without any work to be done is not a dead end; it’s just a more difficult path to walk. You’ll be faced with more questions, more paperwork, and probably some costs you didn’t see coming. But if you go into the process with open eyes and a steady hand, you can still successfully sell your house with unauthorized work.