Selling Home With Open Permits

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longhaulinvestor12
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Selling Home With Open Permits

Post by longhaulinvestor12 »

I am looking for some advice in regards to the sale of my home.

Background: Purchased my NY-metro area home in 2017 ($500K) and brought it to market in Spring 2021 (Contract price of $700K). It's currently under contract but a permitting issue came up due to a dumb mistake I made.

The buyers were worried about the rear patio deck not having a permit and their bank not allowing them to close. This deck was installed by the prior owners of the house but I decided to try and head this off and submit a permit application for it but quickly tried to withdraw it. The building department wouldn't let me withdraw and then looked at the listing photos online to identify other parts of the home that were never permitted (basic finishing of the basement, remodel of 1st floor bathroom, and moving the kitchen from the front of the house to the back of the house) and sent me a violation notice with a list of these items. Fortunately, we had an architect come to prep plans and he said it's all up to code with the exception of a few minor items that should be quick fixes. Again, none of these items were done during my ownership (other than new paint/carpet in the basement) and, based on the age of the fixtures, the kitchen and basement finishing were likely done decades ago. In order to resolve this as quickly as possible, I submitted permit applications for all of the items at the beginning of about 2 months ago and they continue to remain in the queue for plan examination. Conversations with third-parties have revealed this process could take up to 6 months.

My family and I have already moved out of the house and I am not interested in managing this process remotely. Unfortunately, the buyers are first-time homeowners and don't feel comfortable (at the moment) with taking this work on. The way I see it, I have 4 options:

1) Keep extending the sale contract and manage the permit process remotely and eventually close once the permits are closed.
2) Even though the buyers currently say they don't want to do this, convince them to close on the house with a portion of the sales proceeds in escrow (no idea how much they would be comfortable with) and manage the permit process with them remotely. Apparently, their bank and title companies are ok with this concept, they are the only ones not comfortable with it.
3) Offer them a credit/reduction to the sale price and let them take on the permitting issue.
4) Cancel the contract and put the house back on the market "as-is" and disclose the permitting issue will be the buyer's responsibility. No clue on how this issue will impact pricing but fortunately the market continues to remain strong for sellers.

Any advice on how to proceed would be appreciated.

Thank you all in advance,

longhaulinvestor12
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firebirdparts
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Re: Selling Home With Open Permits

Post by firebirdparts »

I know nothing. Everybody I know says you can sell a house for 10% over asking in a single day. There are plenty of buyers out there that are not going to get wrapped around the axle by this. The only reason you wouldn't do that is just because you just like these people.

Now, I know it's all location dependent. I'm no realtor. I'm the kind of guy that would remodel a bathroom.
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Carefreeap
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Re: Selling Home With Open Permits

Post by Carefreeap »

I'd probably back out of the contract stating that they can't close due to their lender not being willing to finance. The buyers are never going to feel "comfortable" in this situation.

Was there a home inspection done? Did you have a home inspection when you bought the house?

Sorry this happened. It's not uncommon to find out these kinds of issues post sale.

Really hard when you are out of town. The good news is that architects can be really good project managers.
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quantAndHold
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Re: Selling Home With Open Permits

Post by quantAndHold »

I would do option 3, and then 4 when your buyers inevitably refuse. Any buyer who’s worried about permits on a *deck* is not going to take over your permit mess.
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longhaulinvestor12
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Re: Selling Home With Open Permits

Post by longhaulinvestor12 »

Carefreeap wrote: Fri Jul 23, 2021 9:58 am I'd probably back out of the contract stating that they can't close due to their lender not being willing to finance. The buyers are never going to feel "comfortable" in this situation.

Was there a home inspection done? Did you have a home inspection when you bought the house?

Sorry this happened. It's not uncommon to find out these kinds of issues post sale.

Really hard when you are out of town. The good news is that architects can be really good project managers.
Yes, home inspection was done and just a minor credit to ease their concerns over something silly. We had a home inspection done when we bought the home originally as well but no one went down to the city to review the original plans and permits filed historically, so none of these items were known about at the time. As long as the house had a Certificate of Occupancy, everyone was good to close.

Thank you for the prompt responses. I'm also leaning towards just taking it back out to market but relying on the advice of my realtor who wants to play this out and try and get the buyers comfortable with the escrow process (it's mainly been the lawyers talking up until now but the realtors are much better at the negotiation process and selling the dream).
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longhaulinvestor12
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Re: Selling Home With Open Permits

Post by longhaulinvestor12 »

quantAndHold wrote: Fri Jul 23, 2021 10:02 am I would do option 3, and then 4 when your buyers inevitably refuse. Any buyer who’s worried about permits on a *deck* is not going to take over your permit mess.
To be fair, the permits are on the deck, 1st floor bathroom, kitchen, and basement. That being said, it's mainly just to permit existing work that (subject to some minor items) is already up to code per the architect, a plumber, and an electrician. But agreed that the deck item originally was ridiculous and I think a lot of it is the buyer's attorney not coming to terms with this being a seller's market.
barnaclebob
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Re: Selling Home With Open Permits

Post by barnaclebob »

If have no problem buying a house with open permits if you included the report from the architect stating the major stuff was up to code.

Push on the buyers a little or put it back up for sale.
adamthesmythe
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Re: Selling Home With Open Permits

Post by adamthesmythe »

Seems to me the thing to do is tell them that you intend to cancel the contract and give them 48 hours to change their minds or propose a solution.

If you end up putting the house back on the market then explain this issue carefully in the disclosures.
LittleMaggieMae
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Re: Selling Home With Open Permits

Post by LittleMaggieMae »

Are you (the seller) working with a local attorney and/or real estate agent who are familiar with your local government? In other words have they dealt with this kind of an issue before? They may be able to help move your permit issues along faster. What you are dealing with is all bureaucratic stuff.

I'm guessing you are NOT the first home seller in your neighborhood to have this particular problem.

This doesn't really answer the question in the OP... but there might be a way to move the permits thru the system quick

I had an issue with city permits after I bought a house - but a call to my real estate lawyer and the Alderman helped remove the dead lock on the permits. The dead lock was that the permitted work was already done but the permits needed to have inspections done BEFORE the work was complete - the City's solution to my problem was "all the work would have to be torn out and redone at my cost so it could go thru the correct order of inspections as per the permits" Even though all the work had past the inspections for the sale of the house which included a City inspection. Who does NOT love bureaucracy!! Thankfully the Alderman was able to negotiate a way around the deadlock that did NOT involve all the work being re done.
Last edited by LittleMaggieMae on Fri Jul 23, 2021 11:00 am, edited 1 time in total.
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RootSki
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Re: Selling Home With Open Permits

Post by RootSki »

Sellers market rules. How many offers did you receive? If you feel your local market is hot, I like the idea of offering a small administrative concession to close out the permits and 48 hours to decide if they want the home or not. It also might be more difficult for a first time home-buyer to find another home they love, and get an offer accepted on it. :wink:
humblecoder
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Re: Selling Home With Open Permits

Post by humblecoder »

I don't know what your local jurisdiction is like. In one of my previous locations, the town required that you get a Certificate of Occupancy in order to transfer the title of the house. If you did not get one, then the sale would not be allowed by the town.

As part of the CO inspection, they would look for improvements for which permits were not obtained (ex: did you replace a hot water heater without getting a permit) as well as look for opened permits that were not closed. The seller would then be responsible for resolving those issues prior to the CO being issued.

I did have one situation where we purchased a house where the seller had started some DIY work without a permit and without completing it. At first, the town would not issue a CO. However, our lawyer went to the town asked if he could issue a "conditional CO". The town agreed as long as I, as the buyer, got the proper permitting, inspections, etc, and the work was completed within 6 months of closing.
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longhaulinvestor12
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Re: Selling Home With Open Permits

Post by longhaulinvestor12 »

LittleMaggieMae wrote: Fri Jul 23, 2021 10:40 am Are you (the seller) working with a local attorney and/or real estate agent who are familiar with your local government? In other words have they dealt with this kind of an issue before? They may be able to help move your permit issues along faster. What you are dealing with is all bureaucratic stuff.

I'm guessing you are NOT the first home seller in your neighborhood to have this particular problem.

This doesn't really answer the question in the OP... but there might be a way to move the permits thru the system quicker.
Unfortunately, we have spoken with a bunch of permit expeditors and there seems to be no way to speed this up. Apparently, the building department is swamped with a post-COVID backlog and everyone is delayed. I also worry about causing too much noise since the initial violations (just based on pictures on Zillow) are a definite overreach by this government and clearly they're trying to get whatever revenue they can to make up 2020/2021 shortfalls (which multiple people have also stated is the reason for this based on conversations they have privately had with govt officials).
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longhaulinvestor12
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Re: Selling Home With Open Permits

Post by longhaulinvestor12 »

RootSki wrote: Fri Jul 23, 2021 10:43 am Sellers market rules. How many offers did you receive? If you feel your local market is hot, I like the idea of offering a small administrative concession to close out the permits and 48 hours to decide if they want the home or not. It also might be more difficult for a first time home-buyer to find another home they love, and get an offer accepted on it. :wink:
We weren't in a rush to sell initially so we initially priced it way above market to see what offers we would get. We then lowered it a little bit and went with this offer. If we priced at market, I would assume multiple offers would come in.

From what we've heard through the buyer's realtor, they have been looking for quite some time and have had immense trouble finding a house (probably due to them being scared to pull the trigger on a home with any minor problem). We had to be tough with them to even sign the contract initially, so I think we will have to do it again as well and make them take it or leave it with a credit.
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longhaulinvestor12
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Re: Selling Home With Open Permits

Post by longhaulinvestor12 »

humblecoder wrote: Fri Jul 23, 2021 10:54 am I don't know what your local jurisdiction is like. In one of my previous locations, the town required that you get a Certificate of Occupancy in order to transfer the title of the house. If you did not get one, then the sale would not be allowed by the town.

As part of the CO inspection, they would look for improvements for which permits were not obtained (ex: did you replace a hot water heater without getting a permit) as well as look for opened permits that were not closed. The seller would then be responsible for resolving those issues prior to the CO being issued.

I did have one situation where we purchased a house where the seller had started some DIY work without a permit and without completing it. At first, the town would not issue a CO. However, our lawyer went to the town asked if he could issue a "conditional CO". The town agreed as long as I, as the buyer, got the proper permitting, inspections, etc, and the work was completed within 6 months of closing.
We were worried about this too but from what we hear through the lawyers, the bank and title company are all ok with closing with funds in escrow to close this out. Just the buyers (and probably their lawyer) are the ones not comfortable with doing so.
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RootSki
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Re: Selling Home With Open Permits

Post by RootSki »

longhaulinvestor12 wrote: Fri Jul 23, 2021 11:00 am
RootSki wrote: Fri Jul 23, 2021 10:43 am Sellers market rules. How many offers did you receive? If you feel your local market is hot, I like the idea of offering a small administrative concession to close out the permits and 48 hours to decide if they want the home or not. It also might be more difficult for a first time home-buyer to find another home they love, and get an offer accepted on it. :wink:
We weren't in a rush to sell initially so we initially priced it way above market to see what offers we would get. We then lowered it a little bit and went with this offer. If we priced at market, I would assume multiple offers would come in.

From what we've heard through the buyer's realtor, they have been looking for quite some time and have had immense trouble finding a house (probably due to them being scared to pull the trigger on a home with any minor problem). We had to be tough with them to even sign the contract initially, so I think we will have to do it again as well and make them take it or leave it with a credit.
I had a somewhat similar issue when selling a home in 2014. My front porch needed repairs, so I entertained the idea of expanding it. I had enough setback distance, but I needed a little more ground cover, so I removed paver patio in the backyard and planted grass, but they still said I needed zoning exception. Long story short, I rebuilt the front porch to it's original specs and never updated the permit. My lawyer filed a letter with the town to close it out on my behalf. Sellers were about to walk though. I forgot all about it until your thread. Good luck.
London
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Re: Selling Home With Open Permits

Post by London »

I bought a home with an open permit and the bank pointed it out but didn’t care otherwise. It’s up to your buyer if this is a big deal or not, but I didn’t care.
Freetime76
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Re: Selling Home With Open Permits

Post by Freetime76 »

It sounds like it’s your call.

If we had moved on (out of the house), and now it’s a vacant, maintenance item on the weekend to do list, I am going to sell it ASAP for a price I’m comfortable with.

Given the you have a bird in the hand, I think we’d ask somebody official-like (an architect? each tradesperson? an attorney?) to draft a friendly letter that explains the circumstances very briefly and the path to resolution. Send this along to your realtor, so s/he can take it to the buyers with an “are you in or out? The seller is going to relist if you do not commit to close on x date, you have 48 hours to discuss”. If they are in, great. Wonderful. It will be a fun intro to homeownership :D .

If they are out, we would relist promptly, with full, updated disclosures (you now have all your trades lined up/looked at it already, so it’s paperwork and waiting), and find a buyer who either is more seasoned or more willing to handle the extra work.

We would not be interested in worrying about anything happening to the house (aka expensive asset) or to the market...these folks have enough information to decide. Who knows? Their realtor may decide to have one of those come to Jesus talks with their clients...sometimes a good agent has to do that.
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sergio
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Re: Selling Home With Open Permits

Post by sergio »

Ugh this makes me nervous. I had my plumber put in a new hot water heater a few years ago, he pulled a permit, but I never bothered to set up an inspection with the building department. It was installed by a super reputable plumber who literally only does hot water heaters all day as a one man shop. I'm now worried about what'll happen when I sell.
swopcorn
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Re: Selling Home With Open Permits

Post by swopcorn »

As a NYC area first time buyer that had the same issue last year with my seller (DOB permit delays), I settled for escrow and closed. It got resolved ~2 months post closing and escrow was returned in full. However, the only reason I got comfortable as a buyer was the size of escrow relative to the work.

2B1BA apartment with electrical panel update work fully done that required permit approval. Potential cost for re-do if needed was likely $2-4k. I asked for $20k escrow and settled for $15k. The purpose of an oversized escrow is

1. Incentivize seller to manage permit process
2. Big enough cushion that if I had to do the work to “fix” myself, there is no risk of having insufficient funds

For the amount of open permits you have, I would probably only be comfortable with escrow >$100k. Why? Because if I have to move the kitchen front to back or tear down a deck… that’s why. Risk? Low. But as buyer, why take any risk. So escrow is “priced” to be zero risk.

Hope this helps…
MishkaWorries
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Re: Selling Home With Open Permits

Post by MishkaWorries »

LittleMaggieMae wrote: Fri Jul 23, 2021 10:40 am The dead lock was that the permitted work was already done but the permits needed to have inspections done BEFORE the work was complete - the City's solution to my problem was "all the work would have to be torn out and redone at my cost so it could go thru the correct order of inspections as per the permits"
So this is the risk of having open permits and people wonder why the buyers' attorney is being cautious. What do you expect the lawyer tell his clients. "Go ahead it should be OK buy you might have redo most of the house."

I'd advise the buyers to keep enough of the selling price In escrow to totally redo all the disputed areas.
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Re: Selling Home With Open Permits

Post by HomeStretch »

sergio wrote: Fri Jul 23, 2021 5:07 pm Ugh this makes me nervous. I had my plumber put in a new hot water heater a few years ago, he pulled a permit, but I never bothered to set up an inspection with the building department. It was installed by a super reputable plumber who literally only does hot water heaters all day as a one man shop. I'm now worried about what'll happen when I sell.
Consider getting the inspection done and permit closed now while your plumber is still active and the water heater is still relatively new. Open permits and unpermitted work have caused issues at several closings in my town.
carolinaman
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Re: Selling Home With Open Permits

Post by carolinaman »

Building inspectors usually have discretion in determining what is and is not up to code. In a situation like this, some cantankerous building inspectors (and there are plenty of them) might get real picky about conformance to code and elongate this process as well as increase the cost of remediation.

I agree with setting up an escrow and kindly tell you buyer to commit or you are canceling the sale. Best of luck!
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Re: Selling Home With Open Permits

Post by Sandtrap »

longhaulinvestor12 wrote: Fri Jul 23, 2021 9:27 am I am looking for some advice in regards to the sale of my home.

Background: Purchased my NY-metro area home in 2017 ($500K) and brought it to market in Spring 2021 (Contract price of $700K). It's currently under contract but a permitting issue came up due to a dumb mistake I made.

The buyers were worried about the rear patio deck not having a permit and their bank not allowing them to close. This deck was installed by the prior owners of the house but I decided to try and head this off and submit a permit application for it but quickly tried to withdraw it. The building department wouldn't let me withdraw and then looked at the listing photos online to identify other parts of the home that were never permitted (basic finishing of the basement, remodel of 1st floor bathroom, and moving the kitchen from the front of the house to the back of the house) and sent me a violation notice with a list of these items. Fortunately, we had an architect come to prep plans and he said it's all up to code with the exception of a few minor items that should be quick fixes. Again, none of these items were done during my ownership (other than new paint/carpet in the basement) and, based on the age of the fixtures, the kitchen and basement finishing were likely done decades ago. In order to resolve this as quickly as possible, I submitted permit applications for all of the items at the beginning of about 2 months ago and they continue to remain in the queue for plan examination. Conversations with third-parties have revealed this process could take up to 6 months.

My family and I have already moved out of the house and I am not interested in managing this process remotely. Unfortunately, the buyers are first-time homeowners and don't feel comfortable (at the moment) with taking this work on. The way I see it, I have 4 options:

1) Keep extending the sale contract and manage the permit process remotely and eventually close once the permits are closed.
2) Even though the buyers currently say they don't want to do this, convince them to close on the house with a portion of the sales proceeds in escrow (no idea how much they would be comfortable with) and manage the permit process with them remotely. Apparently, their bank and title companies are ok with this concept, they are the only ones not comfortable with it.
3) Offer them a credit/reduction to the sale price and let them take on the permitting issue.
4) Cancel the contract and put the house back on the market "as-is" and disclose the permitting issue will be the buyer's responsibility. No clue on how this issue will impact pricing but fortunately the market continues to remain strong for sellers.

Any advice on how to proceed would be appreciated.

Thank you all in advance,

longhaulinvestor12
#4 is the most expedient and predictable with fewest variables.
#1 No. An unknown "money pit" with unknown end point.
#2 No. You can't "convince" people to do anything and if they are "convinced" will eventually boomerang back to you. (remorse).
#3 No. If you are willing to do that, then it raises buyer distrust and also, very importantly, empowers the buyer and gives away your control over the situation.

If your goal is to get permits for what's needed, and likely more will be discovered, you will have to hire an engineer/architect to construct plans and a permit packet for an "as built permit". Usually, "as built" permit fees are much much higher because they are after the fact. Also, where things need to be site inspected by the electrical inspector, etc, and, for example, if things are not visible behind drywall, etc, they may require you to expose the work (tear it out) so that it can be seen.
All in all, the "as built" permitting process from start to completion can be a tiny can of worms or a jumbo can of worms that go on forever.

Actionably, cancel the contract, move on. Relist as "as is" and with full disclosures, and sell it. Put all this behind you.
Actionably, do not rent it out until you get your permits and sell it and all that, unless you want to deal with 2 jumbo cans of worms; tenants, rentals, and permits.

*(Universal Dislaimer).
Lot's of opinions and viewpoints on these things based on so many limited experiences and knowledge and so forth. This is just one helpful one for the OP to consider.
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snackdog
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Re: Selling Home With Open Permits

Post by snackdog »

My neighbors recently did this. They signed a side letter with the buyer which indicated seller would address permit issues and bear costs including any fines from the regulator. This way the seller captured high bidder in a hot market without waiting to satisfy the regulator. The issue in question is an unpermitted building which will be removed about 3 months after closing with delays due to availability of the deconstruction crews. The buyers had to put up with this inconvenience and were annoyed but knew the regulator was on the back of the seller.
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Re: Selling Home With Open Permits

Post by musicmom »

We have little experience in real estate having lived in the same home for 35+ years.
When we downsized 3 years ago, I remember our realtor saying she was going to town hall to check for any open permits. We figured that was standard practice. All was well and we closed on new (old) home.

House we sold was >200 years old.
We were the 4th owners.
There had been countless modifications over many decades. There was a funky toilet in wooden enclosure in unfinished basment.
Everything we did (family room and full bath addition, kitchen gut) was permitted.
Not sure if buyer investigated open permits or not. Never came up.
I think we were lucky.
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longhaulinvestor12
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Re: Selling Home With Open Permits

Post by longhaulinvestor12 »

Hello, I wanted to provide a quick update on my situation in case anyone is interested.

First of all, I wanted to thank all that replied with helpful info on this process.

Second of all, I changed some of the details in my original post and omitted some others for confidentiality reasons in case the buyers (or their attorney) were fellow Bogleheads. In short, the actual relevant details are that I purchased the home for $590K and it was under contract for $800K (probably $30-50K above market). The whole permit issue required not just permitting of the existing areas that I identified in my original post but also some fire safety items to bring it up to code (built in 1946, so not surprising). In total, I estimated the cost to bring everything up to code and permitted would be ~$20K. As I mentioned, the building department was moving incredibly slow on reviewing the permit application and it was looking like the whole process would take months.

Debating whether to just bring it back to market, our realtor claimed (though I have my doubts) that the housing market in our area was softening and it would only go for $700K if we were to find another buyer. Fortunately, our realtor were able to eventually get the buyers comfortable with closing on the house with an escrow holdback to complete the permit process (they were the only offer we received btw, after we reduced the price every few weeks from well above market). They proposed a $30K post-closing escrow and I would need to work with them to finish out the permit process. To just avoid the hassle of construction to bring the areas up to code and organizing it remotely from another state, in addition to waiting for the building department to eventually approve, we countered with a $20K credit and the buyers would take over this permit headache. They came back with a revised credit offer of $22K and we agreed.

The sale closed a couple of weeks ago and it is quite a relief being done with this. Paying $8K (my estimate of the portion of the $22K credit that won't be spent on construction) to the buyers to deal with this months-long headache is well worth it for my peace of mind. Truthfully, I think they were planning to renovate a good portion of the house anyways, so it's not really that much of an inconvenience for them to add this to their own renovation project and its related permits.

It still hurts that my kneejerk reaction to trying to head off a permit issue on the deck ultimately cost me $28K ($22K credit plus $6K of expenses I had already paid). Not to mention all of the lost sleep and anxiety from dealing with this issue unfolding over the past few months. Fortunately, the strong market led to a nice profit above my cost basis in the house even with this added cost.

Additionally, this may be petty, but I am looking into potentially filing a lawsuit against the building department claiming some sort of unfair treatment as everyone I spoke with claimed they have never heard of any residents receiving a violation notice based just on listing photos on Zillow. Not sure if that will go anywhere but we will see.

Thank you all again for your help and allowing me to vent/talk through this issue with rationally-minded individuals.
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celia
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Re: Selling Home With Open Permits

Post by celia »

I'm glad it closed with mutually agreeable conditions.
longhaulinvestor12 wrote: Mon Aug 30, 2021 6:14 pm Additionally, this may be petty, but I am looking into potentially filing a lawsuit against the building department claiming some sort of unfair treatment as everyone I spoke with claimed they have never heard of any residents receiving a violation notice based just on listing photos on Zillow. Not sure if that will go anywhere but we will see.
I'd drop this lawsuit idea. I don't think you can blame public employees who are only trying to do their job during a pandemic. Many public employees are working from home (if even still working). The fact that they found more violations where something wasn't permitted earlier is them just making sure things are up to code. You should be blaming the previous owner instead, the one who didn't get the permits. HOW they found out there was un-permitted work is irrelevant. The buyers could have mentioned something when looking at the building plans. A neighbor could have requested a permit to do something like you have at your house. Or an inspector could have come by to inspect something else and noticed records were missing. Does it matter? You still needed to have past work inspected.

And if the unpermitted work added value to the house at the time it was done, your property tax bill didn't take it into account, whereas the new owners will likely have to pay for a better house than what you purchased. If you open a case up, don't be surprised if past property tax increases might be sought from you for the time span when you didn't pay the increase.
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Sandtrap
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Re: Selling Home With Open Permits

Post by Sandtrap »

longhaulinvestor12 wrote: Fri Jul 23, 2021 9:27 am I am looking for some advice in regards to the sale of my home.

Background: Purchased my NY-metro area home in 2017 ($500K) and brought it to market in Spring 2021 (Contract price of $700K). It's currently under contract but a permitting issue came up due to a dumb mistake I made.

The buyers were worried about the rear patio deck not having a permit and their bank not allowing them to close. This deck was installed by the prior owners of the house but I decided to try and head this off and submit a permit application for it but quickly tried to withdraw it. The building department wouldn't let me withdraw and then looked at the listing photos online to identify other parts of the home that were never permitted (basic finishing of the basement, remodel of 1st floor bathroom, and moving the kitchen from the front of the house to the back of the house) and sent me a violation notice with a list of these items. Fortunately, we had an architect come to prep plans and he said it's all up to code with the exception of a few minor items that should be quick fixes. Again, none of these items were done during my ownership (other than new paint/carpet in the basement) and, based on the age of the fixtures, the kitchen and basement finishing were likely done decades ago. In order to resolve this as quickly as possible, I submitted permit applications for all of the items at the beginning of about 2 months ago and they continue to remain in the queue for plan examination. Conversations with third-parties have revealed this process could take up to 6 months.

My family and I have already moved out of the house and I am not interested in managing this process remotely. Unfortunately, the buyers are first-time homeowners and don't feel comfortable (at the moment) with taking this work on. The way I see it, I have 4 options:

1) Keep extending the sale contract and manage the permit process remotely and eventually close once the permits are closed.
2) Even though the buyers currently say they don't want to do this, convince them to close on the house with a portion of the sales proceeds in escrow (no idea how much they would be comfortable with) and manage the permit process with them remotely. Apparently, their bank and title companies are ok with this concept, they are the only ones not comfortable with it.
3) Offer them a credit/reduction to the sale price and let them take on the permitting issue.
4) Cancel the contract and put the house back on the market "as-is" and disclose the permitting issue will be the buyer's responsibility. No clue on how this issue will impact pricing but fortunately the market continues to remain strong for sellers.

Any advice on how to proceed would be appreciated.

Thank you all in advance,

longhaulinvestor12
#4
Avoid the permitting rabbit hole.

j🌺
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mtmingus
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Re: Selling Home With Open Permits

Post by mtmingus »

Watching the resolution for this issue. Please update us.
Broken Man 1999
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Re: Selling Home With Open Permits

Post by Broken Man 1999 »

longhaulinvestor12 wrote: Mon Aug 30, 2021 6:14 pm Hello, I wanted to provide a quick update on my situation in case anyone is interested.

First of all, I wanted to thank all that replied with helpful info on this process.

Second of all, I changed some of the details in my original post and omitted some others for confidentiality reasons in case the buyers (or their attorney) were fellow Bogleheads. In short, the actual relevant details are that I purchased the home for $590K and it was under contract for $800K (probably $30-50K above market). The whole permit issue required not just permitting of the existing areas that I identified in my original post but also some fire safety items to bring it up to code (built in 1946, so not surprising). In total, I estimated the cost to bring everything up to code and permitted would be ~$20K. As I mentioned, the building department was moving incredibly slow on reviewing the permit application and it was looking like the whole process would take months.

Debating whether to just bring it back to market, our realtor claimed (though I have my doubts) that the housing market in our area was softening and it would only go for $700K if we were to find another buyer. Fortunately, our realtor were able to eventually get the buyers comfortable with closing on the house with an escrow holdback to complete the permit process (they were the only offer we received btw, after we reduced the price every few weeks from well above market). They proposed a $30K post-closing escrow and I would need to work with them to finish out the permit process. To just avoid the hassle of construction to bring the areas up to code and organizing it remotely from another state, in addition to waiting for the building department to eventually approve, we countered with a $20K credit and the buyers would take over this permit headache. They came back with a revised credit offer of $22K and we agreed.

The sale closed a couple of weeks ago and it is quite a relief being done with this. Paying $8K (my estimate of the portion of the $22K credit that won't be spent on construction) to the buyers to deal with this months-long headache is well worth it for my peace of mind. Truthfully, I think they were planning to renovate a good portion of the house anyways, so it's not really that much of an inconvenience for them to add this to their own renovation project and its related permits.

It still hurts that my kneejerk reaction to trying to head off a permit issue on the deck ultimately cost me $28K ($22K credit plus $6K of expenses I had already paid). Not to mention all of the lost sleep and anxiety from dealing with this issue unfolding over the past few months. Fortunately, the strong market led to a nice profit above my cost basis in the house even with this added cost.

Additionally, this may be petty, but I am looking into potentially filing a lawsuit against the building department claiming some sort of unfair treatment as everyone I spoke with claimed they have never heard of any residents receiving a violation notice based just on listing photos on Zillow. Not sure if that will go anywhere but we will see.

Thank you all again for your help and allowing me to vent/talk through this issue with rationally-minded individuals.
House sold!
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
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