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Addition That Does Not Have Permit

Hi,

Interested in home that has an addition that has never had any permits pulled from the City of Austin. What are the potential problems and how can I protect myself?

Also, would an appraisal be completely necessary if the addition does not have a permit?
  • May 05 2013 - Austin
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Answers (5)

I agree with Guy, it happens all the time and we close transactions without additions permits.  I assume you are saying that the permits were not issued, not pulled.  Make sure that the permits were not denied.

You can ask that the owner call the city and have them inspect it and give the OK.  It's unusual post construction but some cities do it.

If there is an HOA, that's another permit that has to be acquired by the ACC "Architectural Control Committee".

Naima
  • May 05 2013
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This issue is very common. Buying and selling homes with unpermitted additions is done all the time, but if a lender is involved that lender can make requirements regarding the addition including requiring it be permitted. Not all lenders will make such requirements and I have sold many, many homes with third party financing involved where there were unpermitted additions. Whether a lender is involved or not, you can hire your own electrical, plumbing, and structural inspectors to provide reports on their findings.
  • May 05 2013
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Also, would an appraisal be completely necessary if the addition does not have a permit?

Appraisals are only necessary if you are getting a loan. If your offer is all cash, no appraisal is needed.

The appraisal is intended to be the eyes and ears of the lender, if there is an un-permitted structure on the property, the appraiser should note it.

If the unpermitted structures is not permitted, it may not be to code. If not to code, it probably can not be insured. Lenders only lend on homes that can be insured, so if the lender takes back the property, and it burns down, the lender wants to know what can be re-built. Whatever that can be 're-built' they will lend on.
  • May 05 2013
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Profile picture for Ofe Polack
Discuss this issue with your buyer agent. I suggest that you make the offer subject to seller solving the issue prior to closing.
  • May 05 2013
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Profile picture for wetdawgs
Have you thought about permits and why permits are pulled?   Basically so there is a second set of eyes confirming structural soundness and safety of the structure, wiring, plumbing etc.    

Is this a risk you are willing to take?  

An unpermitted addition may make the entire home so it can't be insured.   There is risk of fire.  There is risk of shock.  There is a risk it will blow down/fall down more easily than it should in hurricanes/tornados.  

Options:  have the seller pull permits and close them out before you close on the house or take those risks.

An appraisal is necessary if you are going to get a mortgage.   If buying cash you can skip it if you want.

  • May 05 2013
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