Homes are sold every day where work was done by the seller or others without permits. Is this a problem? It depends.

 The seller is legally obligated to disclose all work which requires a permit but for which a permit was not obtained or "finaled." This should be clearly indicated on the "Real Estate Transfer Disclosure Statement" (RETDS).

If it is disclosed on the RETDS, should a buyer insist on a permit? The answer is that this is a negotiable item between the buyer and the seller. In some cases it could mean ripping open walls, ceilings and floors to expose structural, electrical or plumbing work. If the work was actually done correctly and to code, this could be a terrible waste, particularly if the buyer backs out of the sale. On the other hand, without having the work checked by experts, most buyers have no way of knowing whether or not any health and/or safety standards have been violated.

As a rule of thumb, the more extensive the work done without permit, the greater the health/safety risk to the buyer. The resale risk is also substantial. When the new buyer becomes a seller, he may not find another buyer who is willing to purchase the property without finaled permits. This obviously reduces the property's value and, in certain situations, could make the property virtually unsaleable.

Each situation is unique, but the services of a competent, professional home inspector are essential in sales where substantial work was done without permit. In fact, I recommend a professional inspection on every home sale. The buyer should rely on the opinion of the inspector plus those of any additional experts who might be warranted.

A scenario where the only work done without permit was the replacement of the bathroom sink is quite different from one with extensive room alterations or additions. Regardless, cities and counties enforce the Uniform Building Code for an excellent reason: to protect the health and safety of the public. Work requiring a permit should be done under permit. This must not be dismissed lightly.

The reality, however, is that a substantial number of homes on the market at any given time have had work done without permit. This could develop into a bigger problem than it initially appears. What if the buyer asks the seller to get permits on the "un-permitted" work and the seller refuses, but the buyer still wants to buy the house?

Whether you are a buyer or a seller, make sure your agent explains all the risks, including possible problems with lenders and local authorities. All work done without permit should be clearly explained in writing. Ask the right questions and consider your potential liability and options before deciding how to proceed.