Why You Should Read a Home's Permit History Before You Buy It

Considering the expense and trouble involved in buying a home, it's kind of amazing that most people only perform cursory research into the property. They might stop by a few times to walk around; they will probably hire an inspector to take a slightly more in-depth look (though most home inspections aren't exactly what you might call exhaustive), and rely on a title search as part of the lender's normal due diligence. Other than that, the place you're about to drop a small fortune on is probably a bit of a mystery box.

For example: That deck in the back, that new second bathroom the Realtor wouldn't stop mentioning, that new swimming pool-were permits pulled for those projects? Or was that work done by the owner themselves on the down-low? A home inspector, no matter how thorough, won't be able to tell if a permit was pulled just by looking at the work (though DIY-quality work might alert them to the possibility that the project didn't have a permit). And you need to know, because un-permitted work on that house will become your problem if something goes wonky with it, and can have an impact on the future value of the house.

Necessary permits

Most local authorities require permits for a range of major renovations to a home. The list of projects that typically require permits includes major changes like additions, adding pools, changing the roofline, or major electrical and plumbing work. A permit can be expensive and time-consuming, but it ensures that the work will be done according to local building codes because it triggers an inspection process and updates the home's valuation for tax purposes. In other words, pulling a permit keeps the work on the up and up.

But some people avoid pulling permits for the same reasons: They don't want to spend the extra time and money, they don't want to be bothered with inspections (possibly because they're cutting corners and not doing the work properly), and they don't want their property taxes to go up because they remodeled their kitchen. It's not too difficult to get away without getting a permit, especially if the work isn't easily seen from the street.

If you buy a house with a lot of un-permitted improvements, all of those potential problems become your potential problems. And those problems can be major:

• Physical danger stemming from poor work - e.g., electrical fires from substandard wiring, gas leaks from DIY water heater installations, a collapsed deck due to improper construction

• Fines and expense if the work is discovered. You may be required to tear out un-permitted wiring, for example, and have it redone at your expense-and it will be your responsibility as the current property owner, even if you had nothing to do with the original work.

• Tax penalties if the home's assessment should have increased after a major improvement.

• Insurance may deny any claims involving work done without proper permits and inspections, so if disaster strikes ,you might find yourself paying for repairs out of pocket.

Even if the work was done to a very high standard and you have no problems or complaints, un-permitted work can come back to haunt you.

Permit history

Luckily, it's generally not hard to look up the permit history of a property. Here are the basic steps you should take:

• Ask the current owner. If the current owner claims all the work on the house was permitted, they should be able to supply you with the permit paperwork and inspection information.

• Contact the local construction office. Most municipalities have public records available online. You may have to create an account to access them, but then you should be able to conduct a search on the address and see all the permits that were pulled. Check these against any work you see that should have required a permit, or anything that your home inspector flagged as suspicious. If there's no online portal, you might need to go to the office in person to request the records.

• Square footage. Compare the official square footage on file for the home with the square footage you actually see. Many municipal offices can give you this information; if not, sites like Property Shark may be able to supply it. If there's a drastic difference-say there's 500 more square feet in the house than listed in official records-it might mean an addition that wasn't permitted.

Next steps

If you discover un-permitted work before buying the house, you have a few options:

• Have the current owner fix the problems: They may be able to retroactively pull permits if they pay a fine and arrange for an inspection. If the local authorities require removal or replacement of the work, they can pay to have it done.

• Ask for a price reduction. You can estimate the costs of pulling retroactive permits yourself and the costs of re-doing the work or removing un-permitted work, and ask the seller to reduce the sale price to compensate you, or even pay you a cash amount to cover the costs.

Finally, of course, you can just walk away: If a house has a lot of un-permitted work it might be more trouble than it's worth-and if the sellers are already covering up their actions, you might not be able to trust them anyway.