Why Getting Permits Up Front Saves Time, Money, and Headaches

If you plan to undertake major repairs or structural improvements to your home, you will undoubtedly need a permit to do so legally. Whether you live within the Ukiah city limits or in the unincorporated part of Mendocino County, there’s a planning and building department for you!

When do you need a permit? Any time you mess with a utility like gas or electricity, any time you do structural work, any time you build a retaining wall taller than three feet, and any time you build a deck, for starters. If you simply plan to paint your bedroom a lovely shade of lavender, you need not alert the authorities, but if you build a walk-in closet, it’s permit time.

Depending on where you live, you’ll either choose the city or county building department. You’ll likely need to submit drawings of your intended repair or improvement, as well as structural calculations. The building department folks will then assess a fee and issue a permit (provided your plans adhere to building and zoning codes). Once the work is done, a city or county inspector will confirm that the work is complete and to code, and issue a final permit.

I cannot tell you how many unpermitted repairs and improvements have been discovered during the sale of a property. And even without a sale, if you started the permit process but never obtained final approval, you not only have no permit, you have notified the authorities of this fact.

Because many people (or their contractors) are competent to do repairs or improvements, they think they don’t need a permit, but they do. If they ever want to sell the property, they’re now obligated by law to disclose to prospective buyers that unpermitted work was done. So in addition to paying a hefty penalty, the work that was done must meet current code (not the code that was in effect when the repair or improvement was completed). If the repair or improvement cannot be brought up to code, or if it does not comply with current zoning requirements, the building department may require that the repair or improvement be removed. No, I am not kidding.

Bear in mind that not all repairs or improvements are brick and mortar. Grading a driveway, for example, requires a permit depending on how much earth is moved and the driveway’s proximity to nearby bodies of water. I am aware of a situation where a driveway was constructed without a permit and not to code, and the county required that the property be restored to its original condition. The restoration cost exceeded the value of the property. So a word to the wise: get a permit.

In addition to building and zoning codes, some houses must comply with covenants, conditions and restrictions (CC&Rs)—go to http://richardselzer.com/2014/09/08/covenants-and-conditions-and-restrictions-oh-my for more about those. Long story short, if you live in a subdivision, there are likely limitations about the height of fences, whether you can build a second story, or even what color you can paint your house.

Just save yourself the time, money, and headache of trying to get a permit after the fact, and get it up front. Do the work, get the inspection, then put the final permit somewhere you can put your hands on it, should you ever need to. Remember, if you sell your home, improvements can be deducted from the sales price in determining if and how much capital gains tax you pay. Generally, the first $500,000 is deductible for a married couple who has lived in the house for at least two of the last five years.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you’re a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 35 years.

 

10 Tips to Prepare for a Home Appraisal

Whether the real estate market is booming or crawling, having a property appraised is a major hurdle for sellers, buyers and lenders. The appraisal is an objective, third-party report that reviews your property, the neighborhood, and comparable sales in the area to determine the value of your property.

Before the appraiser schedules his inspection, I highly recommend that you, the seller, get other inspections done first, so you have an opportunity to fix any little (or not-so-little) issues. You might as well get credit in the form of a rosier appraisal, since you’ll likely need to do the work anyway.

Here are a few tips to help move the process along smoothly.

  1. Compile a list of recent improvements. If possible, include before and after pictures, and copies of paid receipts for the work. If you did major renovations, include a copy of the contractor’s detailed bid and the city or county permits.
  2. Make sure all areas of the property are accessible, including the attic, basement, crawl spaces and all parts of the garage.
  3. Make sure all utilities are on to alleviate any concerns about whether or not appliances are functioning properly.
  4. If the home is part of a homeowner’s association, include a copy of the fees paid, as well as the contact information for the association president.
  5. Make sure the house is clean and any touch-up painting is done. Appraisers are required to photograph each room, and while it may not make a difference to them if the room is messy, others might be less objective.
  6. Make sure the lawn is mowed, the hose is coiled, and the tricycle is not in the middle of the driveway. While an appraiser is, theoretically, not influenced by such things, he is also a human being and every little bit of neat and tidy helps.
  7. If there are any unfinished projects, make sure you complete them before the appraiser’s inspection.
  8. If there is anything on or around the house that appears permanent, but is going with you when you leave, be sure this is noted in the purchase agreement and mention it to the appraiser, too.
  9. If there are any easements, encroachments or unusual covenants associated with the title, provide a copy to the appraiser.
  10. If you know of any recent “For Sale By Owner” sales that will help support the value, ask the new owners if they are willing to share additional information about the sale.

Basically, you want to prepare your house for the appraiser as you would for a potential buyer. Make the house and the surrounding property as presentable as possible. Remove all the junk and a third of the furniture. And unlike when a prospective buyer plans to view the house, your Realtor or the buyer’s should be there when the appraiser comes. Since buyers and appraisers are influenced by the neighborhood in valuing your property, if you have the intestinal fortitude, consider talking to your neighbors about removing the 12 inoperable vehicles in their driveway and on the street in front of their house. You might even offer to mow their lawn, especially if they agree to keep their 120-pound Rottweiler inside on the day of the inspection.

Be aware: since the buyer pays for the appraisal and it is for the lender, you, as the seller, do not have the right to know the final value, unless the buyer gives permission to share the information. The only way you, as the seller, are privy to that information is if the buyer decides not to go through with the purchase of the property as a result of the appraisal.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you’re a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 35 years.

 

Appraisals 101

It’s a seller’s market, but whether you’re talking about a sales transaction or a lease situation, it’s important to know the value of your property, and which home improvements will pay off. Here are some of the factors that affect a property’s value the most.

  1. Size. Square footage is the single biggest factor in determining a property’s value. Be sure you know the square footage of the home. Measuring it is not always easy and even professionals make mistakes, so estimate it yourself to check the numbers.
  2. Land. How much property does the structure sit on? A big back yard can add a lot of value. However, sometimes the difference between 10 acres and 20 acres isn’t as big when it comes to overall impact.
  3. Condition. The condition of the property (both visible and invisible) is a major factor. Obvious signs of wear and tear are unappealing, but sometimes it’s the structural issues that have a bigger impact on a property’s value.
  4. Location.  Location used to be more important than it is now. While it’s still a major component of value, our telecommuting world allows people more freedom in where to live.
  5. Décor. The style should not only be attractive, but appropriate to the home and the era. It helps to be internally consistent as well as consistent with the neighborhood.
  6. Room Count. In addition to how many bedrooms and bathrooms, the total room count matters. These days, “outdoor kitchens” almost count as another room.
  7. Other Amenities. Pools, hot tubs, and other amenities, while nice, do not increase the value by the amount it costs to install them. And, they can detract if they are poorly placed or in disrepair.
  8. View. To let you know the value of a view, I once knew an apartment building owner who said, rent was $1000 and the view was an extra $200. Yep, people paid it.
  9. Community Amenities. If a property is close to good schools, parks, shopping, and other amenities, the value increases. Now, of course, these are subjective. For a retired couple without children, clearly the schools won’t be much of a draw.
  10. Financing. If the seller is willing to carry the loan, the value of a property may go up. No fuss, no muss (simpler loan application, no fees, etc.).

When it comes to things you can change about your house, the absolute best return on your time and money is to clean and de-clutter. Haul stuff away and deep clean your house—top to bottom. Once that’s done, you can decide  on additional improvements.

People often ask, should I update the kitchen or the bathroom(s)? Well, as with most things, that depends. If you have a four-bedroom/one-bath home, add a bathroom (preferably a master bath). If your kitchen fixtures were done in a nice shade of 1970s avocado, consider renovating your kitchen.

When updating, go neutral. If you want a snazzy color, paint a wall. Paint is inexpensive to replace. Appliances and flooring are not. And, think long and hard before you convert a garage into a family room, because what you gain with one, you lose with the other. It’s almost a fair trade in overall value, so you’re getting little or no return on the money you spent to make the change.

Once your property is in tiptop shape, it’s time for an appraisal. While there are three methods appraisers use to estimate the value of the property; theoretically, they should all come up with comparable values. It costs about $400 to get a single family residence appraised, and this is another one of those times when it’s really important to have a reputable, local professional do the job. Call your local REALTOR for a referral.

In case you’re interested, the three methods of appraisal are as follows.

  1. The Market Approach – compare physical data, get data on several comparable properties, and make adjustments for size, condition, etc.
  2. The Income Approach – figure out the fair market value for renting the property, get income/rental information for comparable properties, and multiply by a ratio to get the appraised value.
  3. The Replacement Cost Approach – figure out the top value (what it would cost to replace it), assess the cost of doing so (including permits, hookup fees, insurance, taxes, etc.) and adjust for the aging of the property (physical, functional, and economic).

Lenders require appraisals, and they can be handy if you’re a For Sale By Owner type of person. If you work with a REALTOR, they can provide a market evaluation as part of their service which will help you estimate the value of your home.

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