If a home falls short of a county or municipal building code, it has a code violation. Once you purchase a home you inherit the violations along with it. When selecting your new home, yes, you can buy a house with code violations; however, depending on the severity of the violations, you might have to get them taken care of before you can live in the house or get a loan and insurance.
“Both residential and commercial code violations are more common than you may think,” according to fixmycodeviolation.com. “[Code violations] possess unique and difficult challenges for the owner.” The most popular code violations include expired permits, door, window, and shutter permits, illegal additions, unsafe structures, A/C change without permits.
By law, sellers must make certain disclosures about the property to potential homebuyers. For example, the federal government requires sellers to notify buyers about lead paint in the property. “State disclosures vary by state, but typically require the seller to disclose known structural problems, defects with the HVAC, electrical and plumbing systems and known code violations,” explains realtytimes.com. And, if you as the buyer asks, the seller must tell you about code violations openly and honestly, regardless of disclosure law.
Your Realtor should certainly help you, but ultimately it is up to YOU to be sure there are no outstanding permits or code violations. It is the buyer's obligation to investigate the property.
First, make sure you get a home inspection (Read: ‘Do I Really Need a Home Inspection?’). One commenter on trulia.com suggests, “do a title search, check out the clerk of court property records, and check with the local planning and zoning board in the county where your target property is located to determine whether there are any code violations.” There are also companies you can pay to do the research for you.
Fines for code violations may vary among cities and states. Even if you pay cash for the home, the fines on the property will continue to compound until they are corrected. You will most likely need an architect or contractor to pull a permit and bring the property into compliance. Some municipalities have stipulations on buying a property with violations. They may require that you place a bond with the city, giving you a set time limit to take care of the code violation, or lose your bond money and face possible fines.
Some code violations are not fixable or may be so expensive to fix that they are financially not do-able. Occasionally, the building department will not settle for any solution except for removal. So, before you purchase a property with code violations, know what the building department considers acceptable for a fix, and know what it is going to cost.
If you decide to proceed with purchasing a home with known code violations, just know that you can and should negotiate this point with the seller. It’s best to spell out violation and permit-related demands in your contract – more specifically, that you want all permits closed out. You can insist the seller take care of any violations, because without them being rectified, you may not be able to get homeowner's insurance (and therefore, you won’t be able to get a mortgage). You may also negotiate a deep discount on the purchase price, so you have room to fix the violation(s) yourself and pay off the penalty.
Purchasing a home with code violations certainly has its risks, and the situation can vary in complexity – but it doesn’t necessarily have to be a deal-breaker. Go into the scenario armed with information, negotiation, and with your eyes wide open.
Sources: Trulia.com; fixmycodeviolation.com; biggerpockets.com; realtytimes.com
