Buying a house with questionable square footage and permitting

October 14, 2015 9:32 AM

Three years ago we sold a house that we had bought thinking it was 1900 sqft but was actually around 1600 sqft. Metafilter provided excellent advice at the time. We're now under contract to buy a new house that we absolutely love and there's a square footage discrepancy between the property tax record and the MLS listing. The MLS listing is about 275 square feet more (2116 sqft vs. 1,841 sqft). Last time the square footage difference was due to a furnished basement. This time it's because of potentially unpermitted additions. How big of a deal is this?

Before we officially own the home, it would be great to get advice on how big of a deal this is. In particular, how much does it matter if unpermitted additions were made on the house 20+ years ago? Our county's online listing doesn't include any recent additions and we're wondering if it is worthwhile to track down old permits.

Relevant Details
* We're in Durham, North Carolina
* The house is in a very desireable neighborhood and the square footage difference won't change the selling price. The house is very reasonably priced at either square footage in comparison to comparable properties.
* We plan to stay in the house a very long time.
* We've had a home inspection and the house is in great shape given it's age.

Questions
* What are the possible repercussions of having unpermitted work done on a house 20+ years ago? Would we need to retroactively get a permit? We're asking our realtor this question as well but it would be great to get outsider advice.
* How important is it to get the square footage right on a house when the square footage won't make a difference in the purchase price?

Thanks in advance for your help!

posted by JuliaKM to Home & Garden (8 answers total)

Best answer: I would ask the city the question about permits, without disclosing the property address. Where I live, I believe the city can either require you to tear it down or charge you 2-3 times the permit fees to get it retroactively permitted, but to get it retroactively permitted, you'd probably have to have inspections, and surely building standards have changed since then. But if it was 20 years ago, they might not care now.
posted by slidell at 9:37 AM on October 14, 2015

Best answer: They certainly might care, and you will need to be careful with this. We had all kinds of additions done to our house in 1988 (27 years ago) before we bought it. When we wanted to make it a rental or sell it as an actual four-bedroom instead of "well, it's a 4-bedroom to us but only a 3-bedroom on paper with the city", I had to tear out a bunch of it, get new permits, etc. The only reason it passed in 1988 wasn't because of different codes, it was because the guy who owned it was buddies with the inspector, so they let a few things pass (of course codes changed, but none related to what we had to do). We kept trying to throw in the "why do you care? It was 27 years ago!" card, but they just brought the hammer down harder. The only thing they let slide was that we had outlets 6 inches too far from each other in one room.

Granted, it was worth it. Our house went from $209k to $315k in value with only $8k of work. Yes, that is extremely rare, but not in our ultra-desirable-bidding-war-houses-sell-in-12-hours neighborhood!
posted by TinWhistle at 10:07 AM on October 14, 2015

Best answer: I recently sold a house that I had done work to 10 year prior that I did not know needed permits. Seriously, I did not know. Anyway, before I could sell it, I needed to get a Certificate of Occupancy from the town. Their mortgage company required it and as it turns out, your insurance company cares too. Your policy might not cover unpermitted work.

The cost to getting permits to me was a $1,000 consulting fee to the former town inspector who helped me marshal through the process. The permits themselves were about $2,500. That was much less than 1% of the value of the house.

One of the risks told to me when I was deciding whether to get permits was that if they wanted to be hard asses, they could ask that I open walls and floors to inspect plumbing and electric.

There is also the potential for a tax increase. If the town only knows you have 2 baths but there are really 3, they could raise the assessed value. Obviously, I do not know specifics to how they tax homes in NC, but I imagine it is either based on last sale or assessed value.

On the other hand, I have a cabin in the ADK with a boathouse and some of the improvements have not been blessed by the APA. I have no intention of ever letting that agency take a crack at it. My insurance company is aware of the issue and has no problem with it. I think I pay an extra $20 a year or so for a rider that covers it.
posted by AugustWest at 10:46 AM on October 14, 2015

Best answer: You could ask for a seller's concession to cover the cost of retroactive permitting. This could be structured to lower your closing costs instead of lowering the selling price of the house (which could be a sticky figure for many reasons).
posted by cynical pinnacle at 10:51 AM on October 14, 2015 [3 favorites]

Best answer: One repercussion I can think of is that the work was not done correctly and you may find yourself, maybe not now but later, having to take out permits for the work required to fix any issues.

If the additional square footage did not even exist would you still buy the property? Sounds like you would.
posted by eatcake at 1:29 PM on October 14, 2015

Best answer: Another thing that can go wrong with a situation like this, is at the appraisal stage if you're applying for a loan, if documentation and permits don't line up with the actual house, few lenders will approve a traditional loan.

Our realtor actually saved us a ton of time and hassle over identifying these houses on the outset. A good friend of ours actually tried purchasing a house that we passed on, and for a couple of the reasons you've outlined above, wasn't able to get a loan for it (a garage had been converted improperly, and without permits to living space…the work was done well, and it flowed with the house…but no permit).
posted by furnace.heart at 2:30 PM on October 14, 2015

Best answer: How important is it to get the square footage right on a house when the square footage won't make a difference in the purchase price?

It might be something that gets caught in a re-appraisal. Unlikely but potentially a problem. I am on the Board of Civil Authority in my town and there are pretty rigid assessment tools for determining the value of a home based, in part, on square footage. So ignoring all the permitting stuff that I know nothing about, you might find yourself in possession of a house where you think the taxes are going to be $X but they really wind up being $X+$Y and that might be a rude surprise. If it were me I'd be calling the town/city lister/appraiser and asking them flat out because you might be able to work something out with the seller while they are still the owner of the property.
posted by jessamyn at 5:32 PM on October 14, 2015

Response by poster: Thanks for all the great advice! My partner spent half a day at city hall talking to the tax assessor, building permit folks, and other officials and it sounds like we are okay. The additions were done in the 70s before the permit office tracked permits. We also found out that the city is moving away from requiring retroactive permits because they can be such a hassle for all involved.
posted by JuliaKM at 5:45 AM on October 17, 2015 [1 favorite]