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29 Jul 2015
Is a building permit important? What if the home you want to buy does not have a building permit? A couple arrived in Sequim to buy a home, and they found the perfect home and property in a peaceful location. They were so excited. Their buyer’s agent told them it did not have a building permit, but she told them it would be easy to get a building permit after they purchased it. All they had to do was fill out the application, staple a notice on a tree, and pay a small fee, and Voila! the Clallam County Building Department would issue a building permit. This is what I call a trap for the unwary buyer. Perhaps this article should be entitled The Building Permit Nightmare.
You might want to know how someone could buy a home and get a loan when the home doesn’t have a building permit, which means it also has no occupancy permit. Appraisers don’t automatically check a building permit file at the local county office. Apparently they are not required to by law or by the appraiser’s code. That’s not a surprise, because they are also not required to do a septic inspection, or a home inspection. The appraiser’s job is to see to it that the home is structurally sound, and so they do a visual inspection. If they see something that is a red flag, they investigate further.
The appraiser’s employer is not the buyer, although the buyer pays his fee. His employer is the lender, and his primary job is to make sure the lender’s loan is secured sufficiently. So the appraiser is looking at the building integrity and the value. Based on the appraisal report, if the lender feels their loan to value ratio is good, and the house is structurally sound without serious issues, the appraiser has done his job, the loan is approved, and the buyer closes on the purchase.
This means some appraisers may feel it is necessary to actually check the county building department’s permit file, and some will not. If the builder of a home never obtained a building permit, and the appraiser does not check the file, the issue never comes before the loan underwriter. A buyer could buy a home, obtain a loan, and close and never know their new home is not permitted . . . until they decide to sell it someday. And here’s where the nightmare begins.
If the new buyer’s lender’s appraiser checks and finds out the house was never permitted, the new buyer’s lender’s underwriter could refuse to fund the loan. This means the homeowner can’t sell his home. Now the seller is in a nightmare scenario!
So what is the lesson here for buyers? There are two, and both are extremely important. Lesson number one is make sure that the home you want to buy has a building permit. You can certainly buy one without a permit if you have cash, but the issue may come back to haunt you when you sell. Lesson number two is simple but no less important. Hire a real estate agent who is educated, experienced, competent, professional and honest.
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