This is becoming more and more an issue in Santa Clara County. During the housing boom, sellers and buyers turned a blind eye to the permitted work. But now, lenders have placed a magnifying glass on the issue of non-permitted work and buyers have become much more savvy about asking about permits. Appraisers (specifically FHA) can be asked by an underwriter to comment on whether or not additions or remodeling was completed with permits. In speaking with an appraiser, if it is obvious that an addition or major remodeling was completed, they will make a call to the city and/or county to inquire about permits. They add these comments to the the appraisal and can adjust the value of the home down if square footage, beds, baths, stories were added without permits.
But this is not simply an issue of value and square footage. It can be a safety issue. What may seem like simple updating regarding new electrical receptacles, newly re-plumbed baths with nice new tile, or more extravagant kitchen remodels can look good but have hidden issues. I see this more and more with “flipped” foreclosures. Investors comes in, applies granite to the kitchen, and new tile to the bath but disclosure indicate no permits and many times, no documentation the work was completed by a licensed contractor.
The debate goes on regarding the cost of permits for “simple” work but the rules are the rules and sometimes buyers are more concerned with “updated” than permitted work. There are not enough inspectors to keep up with the number of foreclosed flips and many times non-permitted work has been a part of the house for several decades without any issues. The obvious converted garage is not the only type of non-permitted work but commonly San Jose residents have made their homes larger without properly following easements, square footage to lot limitations, and many did not use licensed contractors.
If you are buying a house, you can find out about permits through the local municipalities building department. Some cities in Santa Clara County have online searches and others require a written request. Not all permits are online and sometimes you will need to go down to the building or planning office and request to see the plans or documents. Plan to spend anywhere from 1 hour to a day depending on the nature of the building change. Sometimes the online files are not clear on whether or not the permit was inspected and given final approval. If it doesn’t have a final sign off, it is not a completed permit. Ask questions and understand the impact to you as the new owner of the property. Even if it didn’t effect value ten years ago, it may now, or may in the future.
Here is a list of links for permit searches in Santa Clara County. Also, don’t hesitate to ask your real estate agent to help you.