Following on the heels of a recent post we did about what makes a room a bedroom, this email came to me, as did the replies.
Scenario:
You have a new listing in Bernal Heights that’s about to come on the market. Legally, it’s a 2 bedroom, 1 bathroom Single Family Home, but your seller added a very nice bedroom and bathroom suite without the benefit of permits downstairs. The structural engineer signed off on the plans, but the city never issued a permit.
Do you list the property in the MLS as:
-2 Beds/1 bath with a description that there is an unwarranted master suite in the marketing remarks?
-3 beds/2 baths with a description that the room is unwarranted?
The general consensus from replies:
Five agents thought that the home should be listed as a 2 bed/1 bath
Six agents thought that the home should be listed as a 3 bed/ 2 bath
Clearly, as was the case with “What Makes A Room A Bedroom”, the jury is still out on this one. Bottom line…READ THE DISCLOSURES! Know what you are buying and be 100% confident with your decision to purchase. It’s not like you’re choosing which coffee to drink. It’s a BIG decision. Don’t just roll the dice.
–What Makes A Room A Bedroom [theFrontSteps]
–Winner: The Best Coffee House In San Francisco [theFrontSteps]
So, from a buyer’s perspective, what are the risks and costs associated with buying a house with an unwarranted room… especially an unwarranted master suite? Are there potential fines?
Sam,
Sophie pretty much nailed the answer. Let me know if you need me to elaborate via email.
if there is any unresolved grudge between the seller and its immediate neighbors, the neighbors can retaliate by flagging the property to the city and have it tagged – preferably right in the middle of the pending period – pissing off the buyers and putting in jeopardy the deal.
it has happen before and it happens once in a while. In one example, the market was so strong, the buyer sucked it up and coughed up the $40.000 of work to get the red tag removed.
In this market, I would be VERY worried about this. Thus have seller and their agent sell it as 2/1 + an *unexecpectedly nice* *storage* basement area … so the buyer has NO ground to back off an offer based on “false representation of the property”. (or worse, the appraisal failing, or whoever can make the offer fail).
In that case, the property is indeed in the 2/1 pool with the potential to have an above market offer, possibly fast (it’s BETTER than a 2/1) – as opposed to throwing this house in the 3/2 pool and make it the WORSE property of the set, with a strong potential for staling and under-asking offer (or worse, an offer falling and prop coming back on market etc).
caveat: there is one case to still advertise as 3/2. If the property is in a large area of similar houses which are 3/2 – all the same state and most with unwarranted basement. eg some sunset streets with 300 identical houses. If the MLS at that time presents a “large” number of “identical” houses with an “identical” 3/2 unwarranted – then follow the lead and be VERY clear at open houses and disclosure that it’s unwarranted. (the other way would detriment the property to much, so in that case, it might be worth the risk)
I think it is fine to market the home as 3/2; it’s marketing. However, the seller should clearly put the unpermitted work in the disclosure package. Sellers are fooling themselves if they think they are immune / “buyer beware protected” if they have unwarranted work and sell the home without disclosing the issue. The seller will be sued in a heartbeat if that work is ever challenged. Buyers need to get comfortable with the risks associated with buying unpermitted work; or don’t buy. My opinion is that a decent home inspector can check the general work on unpermitted projects to get a sense of comfort. It’s also a good buyer negotiation tool. But ignoring it is a mistake on the part of both parties.
There are reasons to do work without permits. You’ll most likely never get a permit to put a bedroom with only 6’5 ceilings. Does that mean a homeowner shouldn’t do it?