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Buying a House with Unpermitted Additions: Is It a Good Idea?

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When adding on or renovating a portion of a California home, owners are often required to obtain permits for this type of construction. Obtaining a permit can be a costly and time-consuming process. The process can be especially complex for California homeowners who face added regulations relating to earthquake readiness or California Coastal Commission restrictions on land use.

In order to avoid this time and cost, many homeowners take the chance of building an addition without a permit, with the hope that a future owner would be willing to overlook the lack of a permit and find the addition nevertheless valuable. As a potential property buyer, is it wise to consider purchasing a property with an unpermitted addition? What are the risks involved?

You could have difficulty getting a loan. Certain financial institutions are highly reluctant to lend money to buyers of property with unpermitted additions. Others may lend for the purchase of the property, but will ask appraisers not to assign any value to the unpermitted portion of the home. This could be a dealbreaker when making the purchase, and it could also make it more difficult or time-consuming to resell the property yourself.

The unpermitted addition may not be legal. If the owner of the property didn’t only fail to spend the time and money necessary to get a permit, but also built something for which they couldn’t have ever gotten a permit, then the problem could be bigger than you thought. For example, the unpermitted addition might expand beyond a lot’s required setback, or go against zoning ordinances for the neighborhood.

Different appraisers may assign value differently. It is possible that some appraisers might assign a decent amount of value to the unpermitted addition, concluding that the average buyer will be willing to overlook the lack of a permit based on the usefulness of the addition. But others might consider the area to be valued only as extra storage space, rather than as an additional bedroom or unit. Also keep in mind that, the bigger the unpermitted addition, the greater the likely consequences are for the lack of a permit (and the bigger gamble you take by purchasing it).

If you are considering making a real estate investment in Southern California, be sure that you’re fully informed and protected during the purchase process by consulting with seasoned and effective legal help, and contact the San Diego offices of Jon Alan Enochs at 619-421-3956.

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