What if Your Dream Home has Permitting Issues

Financing

During the 1960s, as Oahu went through a building surge, areas such as Manoa, Nuuanu, Hawaii Kai, Kailua, Kaneohe, Salt Lake, Aiea, Pearl City and the heart of Honolulu grew quickly with an influx of new homeowners. 

Many of these homes have seen extended modifications or additions over the years – and not all the work was permitted.

Back in 2008, an Coast Guard Commander, who was a homeowner on the mainland, contacted me about homes he had found while searching for properties on the Internet. His family found their dream home and wanted to purchase it sight unseen (well, except for the photos on PrudentialLocations.com). 

This was a different experience for me! I followed their direction and submitted an offer, on this beautiful home on a private lane, with a lush garden and many mature fruit trees. They were very excited - their offer was accepted!

Because my clients had family in the finance industry, they went with a mainland lender for the mortgage. Normally I would insist on using a local lender, but in this case, it was a family relationship and the conventional loan was obtained without any issues.

 

During the home buying process, we received several important documents pertaining to the home and the land.

1. Preliminary Title Report – This is one of the most important documents a buyer will receive. It identifies the current owners and reveals various liens, encroachments, easements and anything else recorded against the property.

2. Building Permit Package – This package contains all permits pertaining to work done on the home after construction. A contractor should review this package.

3. Survey of the Land – This identifies all boundaries and possible encroachments.

4. Termite Inspection – This is a very important in Hawaii. The inspector checks the house for termite infestation and termite structural damage.

After receiving all the documents we found out the house had been sold several times in the past and that several additions made to the home - not all of them with the proper permits. But, it was their dream home so they decided to move ahead with the purchase "As Is.”

When they arrived in paradise and saw the home for the first time - they were very happy! It needed a little work and they were prepared and ready to do some “permitted” renovations to make it suitable for their family.

In early 2013, I received a phone call from them. They just received orders to move back to Virginia and sadly, would have to sell their home.

We listed their home in early January and received a well-presented offer soon after. The buyers were also in the military and using a VA-backed home loan. My clients liked the buyers’ profile and were very happy to sell their home to a family that also had dogs.

Because the buyers were using a *VA loan (VA-backed loans have guidelines regarding unpermitted home improvements), I was concerned there may be problems with the transaction because of the permitting issues, but my clients were certain these were the right buyers.

Well, let me tell you, this was the longest escrow of my 13-year career in Real Estate. It took nearly nine months to record the sale of this home, and we had to obtain after-the-fact building permits, and several other issues too long to describe!

So, if you are buying a home that has some permit issues please note:

If you have a VA-backed loan, you may encounter many different obstacles.
When it comes time to sell, it could be very painful and costly.
Unpermitted work may affect the home value or even your ability to sell it in the future.
It’s always best to address unpermitted work upfront and understand the realistic obstacles you face in getting your mortgage approval, and potential hiccups that may arise when you decide to sell the home in the future.

If you have any questions regarding real estate or whether buying a home with unpermitted work is right for you, please give me a call. I’m here to help make your real estate dreams a reality.

*Note: VA-backed loans have certain benefits and restrictions, one of which is the house you buy, whether it’s new or previously occupied, will be free of defects. Click here for more information on VA-Guaranteed Home Loans for Veterans.