Considering a Home with Open Permits? Buyer Beware.

open permits FI

In Hawaii it’s not uncommon to come across unpermitted homes and properties with both permitted and unpermitted structures. It’s commonly understood that appraisers will not grant much (if any) value to unpermitted structures. But there’s another permit status that is less familiar to buyers — the home that is being marketed with “open permits.” Open permits or code violations can be a nightmare for an unknowing buyer.

WHAT IS AN OPEN PERMIT”?

An “open permit” is one that has been issued by the County of Hawaii Department of Public Works Building Division but which has not yet been finalized. For a home to be “fully permitted” a final inspection is required and must be passed.

OPEN PERMITS AND CODE VIOLATIONS CAN BE A NIGHTMARE FOR A HOMEBUYER

Open permits or code violations can be a nightmare for an unknowing buyer. Failure to identify open permits on a home can result in a buyer inheriting this uncertain status. Requirements to close an open permit can include fines and fees, completion of pending work, or even removal of work that has failed inspection. Imagine paying for what you think is a fully permitted home only to find out it lacks permits when you try to sell? All other things equal an unpermitted home sells for less than a permitted one.

SELLERS AND LIST AGENTS CAN BE MISINFORMED ABOUT PERMITS

In a recent transaction involving new construction I initially relied on claims made by the listing agent regarding the home’s permit status. I was first told the home was “fully permitted” but when I sought evidence, I was told “the home is fully permitted but has not yet passed final inspection.” I was later informed, “the final inspection will be passed before the close of escrow, but it cannot be scheduled right this minute due to the backlog.” The “backlog” was given as the explanation for why I was unable to find the passed electrical and plumbing permits in the County’s Electronic Processing and Information Center (EPIC).

In this case I learned the list agent was misinformed about the status of the home’s building permits. She may have been relying on misinformation provided by the seller. The seller may have been relying on misinformation provided by the builder. Not really sure.

FOR PERMIT STATUS, GO TO THE HAWAII BUILDING DEPARTMENT

It was an in-person visit to the County of Hawaii Department of Public Works Building Division that clarified the permit status. I learned the backlog was not prohibiting the scheduling of a final inspection and that the most recent electrical and plumbing inspections had been rejected. Until they are passed, no final inspection can be scheduled or passed.

APPROVE PERMITS TO REMOVE YOUR INSPECTION CONTINGENCY

As a result of the information gathered at the Building Division we canceled escrow. My buyer had written an offer believing the home was fully permitted. Our due diligence showed the home was of an uncertain status in regard to permits. Many weeks past the date we were originally scheduled to close escrow the home had still not passed final inspection.

Published by BiggerIsland.com

Aloha! I’m a real estate agent on the wonderful and amazing Big Island of Hawaii. I live up the hill from Keauhou Bay, just south of downtown Kailua-Kona. I love to help people. If I can be of assistance, get in touch.

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