At ALANTE Real Estate, we understand the importance of transparency and compliance when it comes to property ownership. One crucial aspect that homeowners should be aware of is open permits.
Over the past several years, building permits that have not been closed out have become problematic for home sellers and buyers.
Many towns now pay more attention to these permits than in the past. The problem is that if there is a record of any building permits on your home. And, the building department can see if they have not been closed out.
You may incur fines, penalties, additional fees, revoke occupancy permits, or force completion of the work/removal of work and closing out the permit.
Not a big deal?
What if you are under pressure to pull a permit for a roof replacement because the roof is leaking? You discovered an open permit for a previous renovation ten years ago. You are now on the hook to close the permit before opening another...
What are Open Permits?
Open permits refer to permits that have been initiated for a construction or renovation project but haven't yet received final approval or inspection sign-off from the relevant authorities. These permits are typically associated with home improvement projects such as renovations, additions, or repairs.
Open permits can cause delays and complications in property transactions, leading to hesitant buyers, potential reductions in property value, and difficulties in obtaining title insurance. Property owners may face legal liabilities and financial penalties if open permits are left unresolved. Massachusetts code states that an open permit expires after 10 years. But unfortunately each town can have their own rules and regulations regarding the expiration of open permits.
🏠 Let's say a homeowner, John, decides to renovate his kitchen. He obtains the necessary permits for the project, including plumbing and electrical permits, before starting the renovation work. However, during the renovation process, John encounters unexpected delays and eventually decides to put his house on the market before completing the kitchen renovation.
At the time of listing, John realizes that he never closed the permits for the kitchen renovation. These open permits become a concern because potential buyers may view them as unresolved issues associated with the property. Without proper closure of these permits, the buyer might face uncertainties regarding the quality and legality of the renovation work done in the kitchen.
In this scenario, John must decide how to address the open permits to facilitate the sale of his home:
- Closing the Permits: John can choose to close the permits before listing the property. He would need to complete any remaining work required by the permitting authority, schedule inspections, and obtain final approval. By doing so, John can provide potential buyers with assurance that the renovation work was done in compliance with building codes and regulations.
- Offering a Credit: Alternatively, John may opt to offer a credit to the buyer to cover the costs of closing the permits after the sale. This approach allows the buyer to handle the permit closure process themselves, but it could potentially affect the buyer's perception of the property's condition and value.
- Disclosing Open Permits: John could also choose to disclose the presence of open permits on the property disclosure form and sell the home "as-is." However, this option may result in a lower sale price, as buyers may factor in the additional time and expense required to resolve the open permits.
Why Open Permits Matter...
Legal Compliance
Open permits are not just a bureaucratic inconvenience; they carry legal implications for homeowners. It's essential to close out permits properly to comply with local building codes and regulations. Failure to do so could result in fines, penalties, or complications when selling the property.
Property Valuation
Open permits can impact the valuation of your property. Potential buyers may view open permits as a red flag, signaling incomplete or potentially substandard work. This could lead to lower offers or difficulties in closing the sale.
Title Concerns
Open permits may also affect the title of your property. Title companies often conduct thorough searches to uncover any outstanding permits or liens. Unresolved permits could delay the closing process or even derail the transaction altogether.
Addressing Open Permits 🪄
If you discover open permits on your property, it's crucial to take proactive steps to address them:
- Review Documentation: Gather all relevant documentation related to the permit, including application forms, inspection reports, and correspondence with the permitting authority.
- Complete Outstanding Work: If there are any outstanding requirements or inspections, ensure they are completed promptly to satisfy the permit conditions.
- Schedule Inspections: Contact the permitting authority to schedule final inspections for the completed work. Be prepared to address any deficiencies or issues identified during the inspection process.
- Close Out Permits: Once the work has been inspected and approved, follow the necessary procedures to close out the permits officially. This may involve submitting final paperwork or paying any outstanding fees.
How to Sell a Massachusetts Home with Open Building Permits? 🪄
One approach to address this issue is to promptly close any open permits. This solution is often preferred as it eliminates uncertainties for potential buyers. However, if open permits are discovered late in the selling process, it could potentially cause delays in the closing.
Another option is to provide a credit to the buyer, allowing them to handle the permit closure after purchasing the home. However, this approach comes with its drawbacks as unresolved permits carry inherent uncertainties, and buyers may hesitate unless they are comfortable with these unknowns.
Alternatively, sellers can choose to disclose the presence of open permits on the property disclosure and sell the home "as-is." While this option transfers the responsibility to the new owner, it may have implications for the home's value. Properties sold "as-is" typically fetch lower prices, impacting the seller's overall profit margin.
IMPORTANT NOTE: If you are looking to get a smoke inspection and the home you are selling has unpermitted work, stop and don’t pass GO. That is what the Towns are saying! They are comparing the plans on file versus the existing home and if there is any unpermitted work or open permits, they will NOT issue a Smoke Certificate, and your buyer will NOT be allowed to close. Please check this in advance. No one wants to tell a buyer to cancel their movers because you just realized that the seller didn’t pull permits for their beautiful, finished basement and now you can’t get the fire department to issue the Smoke Certificate.
