Seller won't get permits after the fact. My inspector says it probably can't be permitted in any case. I asked them to restore garage to original, without seeking a credit for the loss of 134 sq. ft. They countered with a $750 credit but refuse to do the work.
Issue: Addition has electrical of unknown quality. May nullify homeowner insurance claim or otherwise impact insureability. Loan will still fund (surprised by that), and I've locked a 3.5% rate that seems unlikely to be available again in the coming year. Worse case scenario = city code enforcement makes me restore garage at cost much higher than $750 credit (perhaps by an order pf magnitude, i.e. $7500). RE appreciation has been running >6% in past 18 months. Even at 4% p.a., equity will surpass cost of remediation within three or so years.
All my family members (some of whom were real estate agents) say walk away unless sellers do the remediation before close. This is obviously the safe, conservative approach. OTOH I will only pay more at a higher rate for a comparable house in as little as two months.
What would you do if you were in my shoes?
Would you close escrow on un-permitted garage conversion?
Would the vendor consider an option contract subject to permits been issued ? So you lock in the current sales price whilst you seek the permits, or you decide to do the remedial work at your own expense. Give yourself several months to exercise the option so you have plenty of time.
The vendor may consider it if its difficult to get a mortgage on and there's are shortage of buyers.
The vendor may consider it if its difficult to get a mortgage on and there's are shortage of buyers.
I think we need a bit more info to answer the question. Is this a single family house, or multi-family? Is the garage attached or detached, and what was the space converted into? How long ago was the conversion done?
If it's a single family home, the conversion is at least a few years old and the space is something like an extra bedroom that's accessed directly from the main house then it's extremely unlikely that code enforcement is going to be a problem. On the other hand if it's part of a multifamily building that's being rented out it might be subject to regular code enforcement inspections.
Have you tried calling the building department and speaking to an inspector anonymously and explaining the issue? In my experience they're actually pretty helpful if you're upfront and not trying to pull one over on them.
If it's a single family home, the conversion is at least a few years old and the space is something like an extra bedroom that's accessed directly from the main house then it's extremely unlikely that code enforcement is going to be a problem. On the other hand if it's part of a multifamily building that's being rented out it might be subject to regular code enforcement inspections.
Have you tried calling the building department and speaking to an inspector anonymously and explaining the issue? In my experience they're actually pretty helpful if you're upfront and not trying to pull one over on them.
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jennypenny
- Posts: 6858
- Joined: Sun Jul 03, 2011 2:20 pm
Why are your family members suggesting you walk away? For financial reasons? Or is it a liability issue? Can you get homeowner's insurance in its current condition?
Are you close enough to neighbors where a fire might be a concern (I mean spreading from your house to others)? If you knew there were issues, could you end up not only financially liable, but criminally negligent?
Can you still get a Certificate of Occupancy? You'd never get one here based on the situation you describe.
You're a deep pocket Maus. I wouldn't want to be in any situation where you might be un- or under-insured and vulnerable. I've been sued twice though, so I'm a little gun-shy when it comes to this stuff.
Are you close enough to neighbors where a fire might be a concern (I mean spreading from your house to others)? If you knew there were issues, could you end up not only financially liable, but criminally negligent?
Can you still get a Certificate of Occupancy? You'd never get one here based on the situation you describe.
You're a deep pocket Maus. I wouldn't want to be in any situation where you might be un- or under-insured and vulnerable. I've been sued twice though, so I'm a little gun-shy when it comes to this stuff.
Thanks all. Some additional facts:
1. This is a SFR, 3/2 1416 sq. ft. The un-permitted addition is located in the third bay of the attached three-car garage. They basically walled up the door to the back yard, put a window in the west-facing exterior wall, put up two internal walls with electrical outlets and lighting throughout, and built a loft with step ladder in the south portion of a 10' x 13' room. The door into the room requires entering the garage from the house and walking across the cement slab. It looks like they were using it as a bed room for a teenager.
2. The room is not up to code. It has no heating. The small AC unit draws from the garage (carbon monoxide danger), and the square footage is too small. The cost to correct these problems is more than the addition would be worth in resale value. The only realistic solution is to retain the room as storage/non-livable space or restore the garage.
3. The house is in a high-fire risk zone. Several insurance companies won't write a policy for any new owner anywhere in the subdivision, regardless of the lack of permit. This increases the likelihood that any company that does write a policy will take advantage of the lack of permit to compromise or deny a claim.
4. The option idea posed by @chenda probably won't work. The RE market here is skewed by the lack of home inventory. Houses in the $150K to $250K rang have been selling in a matter of days at higher than list prices, often to cash buyers. While this house is unlikely to attract a cash buyer, and cannot close on a FHA or VA loan with the un-permitted addition; my offer was the second made on the home within hours of it being listed. Should my deal fall through (which it most certainly would if it costs the sellers more than abou $6K to fix), they might have some additional complications selling as quickly with the city alerted to the violation. But they probably believe another buyer will surface sooner rather than later.
5. I have no intention of using the addition as sleeping quarters. I wouldn't object to its existence except for the fact that once I take title it becomes my problem: unknown potential problems and unknown future costs to remedy, not to mention having to disclose all of this to a future buyer.
I guess this is all a very long way of explaining that I am having a hard time determining the risk versus reward parameters. I don't see an "antifragile" outcome at all, but would accept a robust reward greater than risk in medium to long term.
1. This is a SFR, 3/2 1416 sq. ft. The un-permitted addition is located in the third bay of the attached three-car garage. They basically walled up the door to the back yard, put a window in the west-facing exterior wall, put up two internal walls with electrical outlets and lighting throughout, and built a loft with step ladder in the south portion of a 10' x 13' room. The door into the room requires entering the garage from the house and walking across the cement slab. It looks like they were using it as a bed room for a teenager.
2. The room is not up to code. It has no heating. The small AC unit draws from the garage (carbon monoxide danger), and the square footage is too small. The cost to correct these problems is more than the addition would be worth in resale value. The only realistic solution is to retain the room as storage/non-livable space or restore the garage.
3. The house is in a high-fire risk zone. Several insurance companies won't write a policy for any new owner anywhere in the subdivision, regardless of the lack of permit. This increases the likelihood that any company that does write a policy will take advantage of the lack of permit to compromise or deny a claim.
4. The option idea posed by @chenda probably won't work. The RE market here is skewed by the lack of home inventory. Houses in the $150K to $250K rang have been selling in a matter of days at higher than list prices, often to cash buyers. While this house is unlikely to attract a cash buyer, and cannot close on a FHA or VA loan with the un-permitted addition; my offer was the second made on the home within hours of it being listed. Should my deal fall through (which it most certainly would if it costs the sellers more than abou $6K to fix), they might have some additional complications selling as quickly with the city alerted to the violation. But they probably believe another buyer will surface sooner rather than later.
5. I have no intention of using the addition as sleeping quarters. I wouldn't object to its existence except for the fact that once I take title it becomes my problem: unknown potential problems and unknown future costs to remedy, not to mention having to disclose all of this to a future buyer.
I guess this is all a very long way of explaining that I am having a hard time determining the risk versus reward parameters. I don't see an "antifragile" outcome at all, but would accept a robust reward greater than risk in medium to long term.
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secretwealth
- Posts: 1948
- Joined: Mon Jun 27, 2011 3:31 am
The risk is having a room that isn't to code and that costing you time and/or money to convert it down the road. The reward is the negotiating power this gives you.
$750 credit isn't enough. If you are going to go ahead, you should get a quick estimate on converting it back to a garage and negotiate for that plus 20% (to recoup your own labor and pay you for the hassle). I doubt that'd come to only $750.
$750 credit isn't enough. If you are going to go ahead, you should get a quick estimate on converting it back to a garage and negotiate for that plus 20% (to recoup your own labor and pay you for the hassle). I doubt that'd come to only $750.
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frugaladventurer
- Posts: 118
- Joined: Sat Sep 15, 2012 11:05 pm
I would find out if the door from the garage to the outside that they walled off, needs to be restored? Seems like it might be a safety issue, having that exit.
If that's the case, then I imagine replacing that doorway and door could easily cost $750 or more. The rest of the work should be mostly demolition, which would be cheap and something you could mostly do yourself.
If that's the case, then I imagine replacing that doorway and door could easily cost $750 or more. The rest of the work should be mostly demolition, which would be cheap and something you could mostly do yourself.
If you only plan to use this for storage/workshop I don't see the problem. Basically, if you disconnect the electric outlets (use an extension cord instead if you need power in the room) this is simply a partitioned off part of the garage. Since it didn't add any square footage it's not even an addition, it's an interior remodel, and depending on your local codes might not have even required a permit in the first place. You can check with your insurance company, but I don't see how they could use this to deny a claim since this was already present at the time they write the policy. worst case, since the added walls are non-load bearing it sounds like you could pull them down in one day with a sawzall and a crowbar.
If it were me I'd be a lot more concerned about the high-risk fire zone.
If it were me I'd be a lot more concerned about the high-risk fire zone.
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George the original one
- Posts: 5406
- Joined: Wed Jul 28, 2010 3:28 am
- Location: Wettest corner of Orygun
If there are code problems for what they added, then there are likely code problems with repairs performed over the years and you just haven't found them yet.
Susswein is correct in what it will take to undo the known work. Not a problem if you're handy.
It's the unknown work that is the problem. You are absolutely in the negotiating seat on this if you wish to proceed. Do not back down if you proceed.
Susswein is correct in what it will take to undo the known work. Not a problem if you're handy.
It's the unknown work that is the problem. You are absolutely in the negotiating seat on this if you wish to proceed. Do not back down if you proceed.
Seems that there might be a hard to describe element to the deal-- sounds like you want to buy this house. Sounds as though were it not for the unpermitted addition this house would be a good deal for you.
It's easy for others to say 'walk away'-- particularly if they're not trying to find a specific type of house in a specific area in a sellers market, within a certain time frame (not exactly a recipe for optimal decision making!).
Here's what I might do: I'd inspect it with a contractor and electrician who seem to do reasonable work and try to get an idea for what it's going to cost me. If it were $7k or so, and I could get $1k out of the seller, I might be okay with that-- after all, you'll reap some of the benefit of having a house that is up to code, so I don't think you have to feel like you have to get the seller to pay for every penny of the changes.
Perhaps I'm sympathetic in that I'm under contract to buy a house that my wife has decided that we are buying-- okay obviously I'm going along here, we have a good relationship, but even in good relationships degrees of want are not always equal... At any rate, our electrician said it would take $7500 to get the house up to snuff-- only part of it is code violations, though. We asked for a $1000 credit. They told us: take it or leave it. So far, looks like we're taking it.
Though, if I couldn't insure the property, or was worried about reselling due to permit violations, I wouldn't buy it. I can't stomach that level of risk
It's easy for others to say 'walk away'-- particularly if they're not trying to find a specific type of house in a specific area in a sellers market, within a certain time frame (not exactly a recipe for optimal decision making!).
Here's what I might do: I'd inspect it with a contractor and electrician who seem to do reasonable work and try to get an idea for what it's going to cost me. If it were $7k or so, and I could get $1k out of the seller, I might be okay with that-- after all, you'll reap some of the benefit of having a house that is up to code, so I don't think you have to feel like you have to get the seller to pay for every penny of the changes.
Perhaps I'm sympathetic in that I'm under contract to buy a house that my wife has decided that we are buying-- okay obviously I'm going along here, we have a good relationship, but even in good relationships degrees of want are not always equal... At any rate, our electrician said it would take $7500 to get the house up to snuff-- only part of it is code violations, though. We asked for a $1000 credit. They told us: take it or leave it. So far, looks like we're taking it.
Though, if I couldn't insure the property, or was worried about reselling due to permit violations, I wouldn't buy it. I can't stomach that level of risk
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secretwealth
- Posts: 1948
- Joined: Mon Jun 27, 2011 3:31 am
You found a house you like at a price you'd be willing to pay if not for the problem. Use the problem to your advantage.
Go into the planning department and tell them your situation. Find out what would need to be done to bring the garage up to code. Have the most expensive contractor in town give you an estimate. Write up your notes from the conversation with the planning department, attach the business card of the city inspector along with the estimate from the contractor and submit it to them with a low offer. Negotiate from there.
Don't forget the golden rule. He with the gold makes the rules. I suspect the bank is still willing to fund the loan because of your unique situation. Most buyers do not have that so they're probably getting offers that fall through at funding. Most banks will not overlook such an important fact. It would be interesting to see how the appraiser handles it.
Go into the planning department and tell them your situation. Find out what would need to be done to bring the garage up to code. Have the most expensive contractor in town give you an estimate. Write up your notes from the conversation with the planning department, attach the business card of the city inspector along with the estimate from the contractor and submit it to them with a low offer. Negotiate from there.
Don't forget the golden rule. He with the gold makes the rules. I suspect the bank is still willing to fund the loan because of your unique situation. Most buyers do not have that so they're probably getting offers that fall through at funding. Most banks will not overlook such an important fact. It would be interesting to see how the appraiser handles it.
@SW, I think I get what you're saying, and I agree to a certain extent-- people are willing to pay more for things based on emotions. On a broad scale, it seems the key is just having emotional responses that are similar to other people, thus if my wife becomes attracted to a house, a car, or piece of art and therefore is willing to pay more for it, as long as some other people have a similar response (attraction they're willing to pay for), it shouldn't matter too much.
"In this case, it sounds like your wife's desire is yielding a profit of $6,500 to the sellers." Well, only kind of... if we didn't buy the house, it would very likely sell at a similar or higher price within 90 days, so if we walk away I don't profit $6500, and they don't lose $6500, not long term at least. It's hard to know for certain how much they'd get from another buyer, but it could easily be more than we're offering-- if we walk away, they might profit more.
The $7500 quote also isn't an absolute truth as to what needs to be done to bring the house up to code-- it's one quote, and it includes some upgrades that we'd like to have done including installing some lighting. The $1000 we asked for was to update the wiring to current codes-- it was up to code when built, and able to be sold and insured as is and it does function, and also to install smoke detectors and CO detectors, and to replace some of the outlets that the not so bright owners painted over and damaged. I honestly don't think the current owners would do any of this work themselves if they continued to live in the house.
"In this case, it sounds like your wife's desire is yielding a profit of $6,500 to the sellers." Well, only kind of... if we didn't buy the house, it would very likely sell at a similar or higher price within 90 days, so if we walk away I don't profit $6500, and they don't lose $6500, not long term at least. It's hard to know for certain how much they'd get from another buyer, but it could easily be more than we're offering-- if we walk away, they might profit more.
The $7500 quote also isn't an absolute truth as to what needs to be done to bring the house up to code-- it's one quote, and it includes some upgrades that we'd like to have done including installing some lighting. The $1000 we asked for was to update the wiring to current codes-- it was up to code when built, and able to be sold and insured as is and it does function, and also to install smoke detectors and CO detectors, and to replace some of the outlets that the not so bright owners painted over and damaged. I honestly don't think the current owners would do any of this work themselves if they continued to live in the house.
So, I have the keys, I own the house. I have to demo the garage addition, at a cost of around $1250. The sellers pulled some penny anti shit like swapping out the nice designer kitchen sink faucet for a Walmart special. The stupidity and cupidity of some people shocks me, but holding on to anger for the sake of a few hundred dollars seems counter productive.
I will make this house mine, and I will make it an island of ERE sensibility.
I will make this house mine, and I will make it an island of ERE sensibility.
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Riggerjack
- Posts: 3191
- Joined: Thu Jul 14, 2011 3:09 am
Re: Would you close escrow on un-permitted garage conversion
yeah, this is a little late, but the room you describe is a shop, regardless of how it was used previously, or whether a permit was pulled. without a heat source/closet, it's just a shop. i'd keep it. if i was worked up about the permit, get an inspector to look it over. worst case scenario, they didn't use PT lumber on the baseplates, the wiring's wrong, and they penetrated the fire barrier of the garage incorrectly. if that's the case, these are all DIY fixes, if you want to keep it.
you should be able to get your insurance agent out and ask him/her was is needed...
and as an ERE homeowner now, there's almost no reason to spend 1250 to get this demoed.
you will need a hammer, reciprocating saw (sawsall), screwdrivers, needle nose pliers, a box of contractor trash bags, a buddy, and a 12 pak of your preferred beverage, and at worst, a few hours of energetic uses of said tools. wear gloves, be safe, but this is a bbq job, as in "hey Joe, come on over Saturday, we're tearing out a few walls and having a bbq."
you should be able to get your insurance agent out and ask him/her was is needed...
and as an ERE homeowner now, there's almost no reason to spend 1250 to get this demoed.
you will need a hammer, reciprocating saw (sawsall), screwdrivers, needle nose pliers, a box of contractor trash bags, a buddy, and a 12 pak of your preferred beverage, and at worst, a few hours of energetic uses of said tools. wear gloves, be safe, but this is a bbq job, as in "hey Joe, come on over Saturday, we're tearing out a few walls and having a bbq."