Time is money in the go-go world of house flipping. Bay Area building officials say that reality has led some flippers to cut corners by not getting permits and city inspections when they do remodels.
While unpermitted work is a perennial problem for cities, the big surge in dilapidated foreclosures changing hands means there’s more rehab being done — and thus more opportunities for folks to skip all the required steps. For a more in-depth look at that issue, click here.
Of course, it’s not only flippers who make renovations without the city’s okay.
“If you stand on a street in the inner Sunset and look down the block at 20 homes, probably 12 or so would have done extensive remodeling without permits,” said Mark Colwell, an agent with Redfin in San Francisco. “The reason is because of feasibility and what it means to do improvements in San Francisco. If there is space from a basement or a bonus room below your little two-bedroom bungalow in the Sunset, it’s pretty cheap to add another bedroom and bathroom, even if it’s kind of funky and has a low ceiling height. A lot of people go to Home Depot, do some research on plumbing, (do the work) and put Mom and Dad in there.”
But when it comes time to sell, that unpermitted work is not a plus. “Appraisers cannot count it as part of the square footage,” he said. “They often will take it into account, factoring it into the value, but will give it, say, 30 percent weight, as opposed to 100 percent weight.”
California’s mandated disclosure forms include a section on whether work was done without permits. Sometimes the seller may honestly not know and will simply say so. Buying a house with unpermitted work can mean a big hassle for the new owner.
“People don’t always know because the property may have been sold four times in the past 20 years,” Colwell said. “They say, ‘We think the kitchen was done with permits but aren’t sure.’ It’s a buyer-beware situation. I make clear to my clients that what that means in the real world. If you were to go pull permits to do an extensive expansion of your kitchen or something like that, and the city were to come out and poke around and say, ‘What’s this here, did you get permits for that?’ they could potentially put an abatement on the property and require that you do it correctly or rip it out and return it to its previous use.”