Are we open to "open permits?"

What to consider with open permits

You should always know going in that, barring lots of $$$, there will always be a "catch." Said differently, if there is no "catch," the $$$ is the catch.

If you find a huge 4 bedroom ranch in Commack, great property, updated kitchen. And it can be had for what seems like $50K less than every other house like it. When you see that, you have to ask, "What's the catch?"

Often, the catch is that the current owner did construction and didn't close their permits. What does this mean?

If a house has "open permits," it means they did work but failed to get a final inspection. Permits, along with the certificates of occupancy you get when they're done properly, were intended to let a homeowner (or future homeowner) know that the government (usually the town) has determined that the work done on this house has left it safe to live in (to "occupy"). "Open" permits happen when a homeowner intends to get the government to approve, but fails to take that last step. Sometimes, this is because of some logistical issue (e.g., the homeowner dies). Other times, it's because the work was done wrong (e.g., slanting floors, no GFI in bathroom). The genuine safety issues can typically be addressed in a thorough inspection. Logistical issues can often be resolved through contract (i.e., seller agrees to get permits closed out, and attorney holds $$$ in escrow while we wait).

What does this mean for you? Let's take these in order of when they'll come up.

1. If there are safety issues, you'll need to estimate the cost to remedy. You don't want to move into a house that isn't safe. Often this $$ can be negotiated through a seller concession. Talk to your broker. If you have the vision to get this done, this is a great way to find value.

2. If there are open permits, the title search your lawyer does will identify them, and it may make it hard to get a mortgage, if you need one. If you don't need a mortgage, or have a more creative lender, this is a great way to find value.

  1. When it's time to sell, your buyers will be going through an analysis just like this. You'll be explaining how it's not a big deal...or pointing them to this blog post. As they say on the Simpsons, "that's a problem for future Homer."

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