No permit? Then seller beware
Author: Skia
Category: Real Estate
Q: Recently I saw a newspaper article about work done on a house without a building permit. I have had much work done to my home without permits. When I sell the house, is this a case of buyer beware or could there be a problem with the building inspectors if the buyer wants to make a stink?
My house now has more square footage than shown on the official county records. Would I be taking a risk if I mention my home’s square footage?
A: Shame on you for renovating and expanding your home without building permits. When you sell your home, you will regret not following the rules.
You ask if this is a case of buyer beware. Today’s rule has become “seller beware of the buyer.” To protect yourself from after-sale lawsuits, you must disclose all known defects with the house, including the lack of building permits.
A buyer who purchases your house should demand a large discount for the risk he or she is taking. If the buyer decides to make improvements requiring a building permit, the building inspector could insist the illegal improvements be brought up to code. The building inspector might demand opening up the walls to inspect the wiring and plumbing.
If the assessor discovers that your house now has more square footage than shown on the official tax-assessment records, you might be assessed for back taxes, called escaped taxes.
When the buyer’s mortgage appraiser evaluates your home and checks the official records, the appraiser will deduct market value for the illegal space you added. In summary, you made a serious mistake by not obtaining building permits for the work performed on your home.
Q: In 1980, my father set up the title to his condominium with his wife … as joint tenants with right of survivorship, a life use … with the remainder to me, his son. In 1981, his wife divorced him. But the divorce attorney failed to remove her life use from the condo title. My father died in 1986, and I have been living in the condo and paying all the taxes and maintenance ever since. How do I get my stepmother’s name off the title?
A: The easiest solution is to offer your stepmother money for her quitclaim deed to you. Be sure it is properly prepared by a local real estate attorney so it clearly gives up all her rights to the condominium. Whoever drew up that deed to the condo did a very poor job. The issue of a “life use” should have been resolved at the time of the divorce.
Depending on state law where the condo is located, you might be able to claim title to the condo by adverse possession if you occupy it without your stepmother’s permission. But adverse possession is a stretch, and I would use that legal argument only as a last effort.
If your stepmother refuses to cooperate with you, your best alternative is to bring a quiet title lawsuit against her in the county where the condo is located, asking the court to determine her rights after the divorce, if any. You will need a real estate attorney - this is not a do-it-yourself project.
Q: Several years ago, I refinanced my home through a mortgage broker recommended by a friend. He repeatedly assured me there would be no prepayment penalty. When I sold my home in March 2007, I was charged a $20,000 prepayment penalty.
I contacted the mortgage broker, who said it was done in error and there was to be no prepayment penalty. Washington Mutual said if my buyers had financed through them, the prepayment penalty would have been waived. In the meantime, I am out $20,000. When I signed the loan papers I failed to notice the prepayment penalty, as I was in a hurry to get to another meeting. Do I have any recourse?
A: No. You have only yourself to blame. You should not have signed in haste the loan papers, which clearly stated there was a prepayment penalty.
Oral promises mean nothing in real estate. Everything must be in writing to be enforceable. That was a very expensive lesson for you to learn. In the future, read before you sign.
Q: Three of us own a house together. Two of us want to sell, but one co-owner doesn’t want to sell. The one who opposes a sale can’t afford to buy out the other two. He refuses to sign a listing to sell. Is there any way we can get this house sold if the third co-owner says he won’t sign any sales papers?
A: Yes. The two co-owners who want to sell should bring a partition lawsuit to force a sale.
After the judge orders the sale, the uncooperative co-owner then must cooperate or he will be in contempt of court.
Q: We are negotiating a by-owner sale of our home to a neighbor. We refinanced about two years ago and had the title checked. We know the title is clear. However, the title insurance company will charge thousands of dollars for a new title policy for the buyer. Is there a way to make a sale without expensive title insurance, such as insuring the title personally?
A: Your buyer needs an owner’s title insurance policy from a reliable title company. He or she would be a fool not to obtain one. For example, you might have incurred a judgment, mechanics’ lien or IRS tax lien, which the buyer would become obligated to pay.
Your self-insuring the title for the buyer is not feasible. However, if you go back to the title insurer that issued the lender’s title policy two years ago, it may be possible to obtain a discounted rate.
The new Robert Bruss special report, “Foreclosure, Short Sale and Distress Property Profit Secrets,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010, or by credit card at (800) 736-1736 or instant Internet delivery at www.bobbruss.com. Questions for this column are welcome at either address.
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investment property
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