Would you buy a house if Former Owner finished the Basement?

[John M Wilson]

Here's the situation:

My daughter and son-in-law are in the process of buying a house (offer was accepted, closing hasn't happened yet). The house is everything that they are looking for, in a good neighborhood, etc.

The issue is that the current owner did a DIY construction where he finished off the basement. Problem is, he didn't pull a permit, so none of the normal codes inspections were done.

I haven't seen the work in person, but from pictures, it looks to be a pretty good job. Nothing looks unprofessional. Regular Home Inspection was done, and no major issues noted.

Assuming that everything that you can't see is up to code, what is the process to "get right" with the Authority Having Jurisdiction and get all the proper approvals and paperwork done? I assume that this is not the first time this has happened, is there a procedure in place that doesn't involve ripping out finished drywall and trim to see if the Romex was stapled properly?

Will this be an issue with their homeowners insurance? How about the tax assessor?

I don't want to be "that guy" and throw cold water on their plans for no reason, but I don't want to have them walk into a nightmare, either.

Any advice is welcome!

[Ken Combs]

All dependent on the AHJ. In my area there is no issue with a building inspector once the lender and pre-purchase inspection is done. Insuran.ce company may or may not do an inspection before issuing a policy. If they don't or do one and pass it there shouldn't be an issue. Our tax assessor does a periodic 'drive by' evaluation, I think every other year. That is the extent of the valuation policy. As I understand it, interior work is not considered in assessment, only things that change the foot print.

[Thomas McCurnin]

Did the owner add a bathroom?

Later, if they decide to do add a shower, update a service panel, or do something else that requires a permit, and the inspector notices an additional un-permitted bathroom that might be a problem. Depends on the city or county agency which issues permits, their policies and how the inspector feels that day.

It's a lot of "ifs" but me, I wouldn't lose any sleep on it.

[Jim Becker]

If there was plumbing involved, the risk is larger, because that's "the one thing" that pretty much universally requires a permit. In many jurisdictions, there is less concern or even no requirement if it's just floors, walls and electrical...it depends upon the specific jurisdiction. So your daughter and her husband, with the help of their Realtor, need to ask the jurisdiction directly what is required to heal any permit situation as that should be at the cost of the seller.

[Andrew Seemann]

A lot will depend on the city/AHJ. One house we looked at when we moved a dozen years ago had a bunch of work done the "Home Handyman", an engineer that thought he knew everything about home renovation. Much of it was incorrect. I particularly liked how he had zip tied all the wires to the Bulldog Pushomatic breaker box into a long unsecured 8' rope across the garage trusses. There were also many other non-code compliant issues.

It was bad enough that I stopped by the city to ask what permits had been pulled, and found that he had pulled none. I had mentioned that the homeowner had done a bunch of non-permitted work and not all correctly. The city could not have cared less, and basically said it was my problem whether I wanted to buy the house or not; they had no concerns. I noted the issues to the homeowner and we put out a bid taking them into consideration. We ultimately did not buy the house as the owners also had an unrealistic idea of the property's value. In my case, I knew enough to spot the issues and had a plan laid out to fix them, but again, I would have been going in with full knowledge of the issues. It's hard to say. As for having it inspected, some home inspectors are really good, some not so much, the same with insurance inspectors.

For some other cities around here, I think they would have sent out a SWAT team for work done without a permit. Go figure.

[George Yetka]

In NJ any unpermited work is permited and inspected before sale is complete. Im not sure of what system is there for them to know. But it may be as simple as the home inspection is compared to the tax assessment. So extra bathrooms/ finished basements/ etc.

[Bill Dufour]

Problem I see is did they do it. right so it does not leak, grow mold etc.
Bill d

[Mark Wedel]

I'd be less concerned about a finished basement than if they added a room off the back. In the case of the basement, unless they did something stupid like remove supporting posts, there should not be any structural issues - the added walls should be non structural, the drywall, flooring, etc, is basically cosmetic. Wiring not done properly could be an issue (both from a safety standpoint if under gauge wiring was used, but also an annoying standpoint if the entire basement is on a single circuit because that was easier than running a new circuit or two). As others have noted, if pluming was changed, that could be a concern.

[Al Weber]

It’s TN so unlikely the local governing body cares unless it’s in a larger metro area and eve the probably not an issue.
I know because I bought a home that had been the basement finished by the owner. He was a blowhard who did the work himself. He heated and cooled the lower level by tying into the existing HVAC. He forgot one thing and that was returns so that lower level would never get warm. I finally installed a min split to make it habitable in winter. The so called home inspector didn’t catch it so no recourse. He also had not performed electrical work to code.
i recommend getting specific inspections done to minimize your risk.

[John M Wilson]

Did the owner add a bathroom?

The bathroom downstairs has definitely been re-done, I'm not sure what was there prior to the remodel.

Since the basement is on a slab, it's unlikely that this person dug up the floor to install the traps & etc for the toilet & shower drain.

I'll have my daughter ask...

[Bill Howatt]

I wonder what percentage of basement finishing is done strictly without permits or anything else?

[Sam Force]

I would venture to say probably over 75% of homes have some type of work performed without permits

[Pat Germain]

I live in Colorado. I lived at my previous house for over 20 years. I bought it when it was new construction. Most of the houses on my street have basements which were not finished by the builder. The builder installed insulation with no sheeting.

Over those years, I observed many of my neighbors finishing their basements. One of these neighbors was a contractor who finished basements for a living. And in those years, again and again, I saw a large dumpster dropped in the driveway right at the time my neighbors were putting their homes up for sale. Turned out none of their basement finish jobs met code. Even the job done by the contractor. They literally had to rip everything out down to the studs just to sell the house.

My neighbors across the street hired a professional to finish their basement. The first time it got really cold, they had pipes freeze and burst which flooded the basement. Much of that finishing job had to be ripped out as well.

My neighbors next door had their basement finished by a contractor who built out a bedroom and a full bath as an in-law suite. My neighbor's parents lived in the basement for years and they had no trouble. Now their son lives down there and he really likes it.

So, in summary, a properly-done basement finish job is great, but boy can things go wrong. I would try to find a very good inspector to check everything out before closing on that house. Likely, everything is just fine. But maybe not.

[Nicholas Lawrence]

Lots of variables, including the age of the house.

My basement was finished by the prior owner. No problems with insurance or taxes.

I have had inspectors in the house for electrical work and when the gas company replaced something in the basement, and nobody raised any issues.

[Lisa Starr]

When we sold a prior home, we had to request a copy of the permits pulled during our ownership and prove that each permit was either inspected or exempt from inspection. All of this had to be provided to the buyers.

[Jim Becker]

The bathroom downstairs has definitely been re-done, I'm not sure what was there prior to the remodel.

Since the basement is on a slab, it's unlikely that this person dug up the floor to install the traps & etc for the toilet & shower drain.

I'll have my daughter ask...
In some jurisdictions, if the fixtures are merely replaced in the same location and connected to the original plumbing (within reason...replacing an old valve would be ok, for example) there may not be a permit required for the bathroom. Where I used to live was like that...I did not need a plumbing permit when I re-did the kitchen and powder room (and the original master bath upstairs) because it was merely a facelift with no new plumbing involved. But again, it's jurisdiction specific.

[Dan Friedrichs]

Over those years, I observed many of my neighbors finishing their basements. One of these neighbors was a contractor who finished basements for a living. And in those years, again and again, I saw a large dumpster dropped in the driveway right at the time my neighbors were putting their homes up for sale. Turned out none of their basement finish jobs met code. Even the job done by the contractor. They literally had to rip everything out down to the studs just to sell the house.

Respectfully, this sounds a bit dubious...

Who "required" this?

I sold a house in CO, recently, and beyond a line on the seller's disclosure form that said something like, "To the best of your knowledge, were permits obtained for any work that may have required them?" (which seemed to be worded in a way that intentionally provided plausible deniability...), no one asked or checked on any permits/renovations/etc.

You think the city is sending out an inspector on every home sale? Huh?

[Bill Dufour]

My city requires a permit to install a automatic sprinkler system. This has been code for twenty years or more. No permit for a sprinkler system has ever been pulled.
Bill D

[Stan Calow]

Around here, I am suspicious of finished basement walls covering up foundation cracks or water intrusion.

[mike stenson]

Respectfully, this sounds a bit dubious...

Who "required" this?

I sold a house in CO, recently, and beyond a line on the seller's disclosure form that said something like, "To the best of your knowledge, were permits obtained for any work that may have required them?" (which seemed to be worded in a way that intentionally provided plausible deniability...), no one asked or checked on any permits/renovations/etc.

You think the city is sending out an inspector on every home sale? Huh?

I pulled the permit history for every house I've bought. It's free, and easy. I would imagine that others do too.

[Perry Holbrook]

I would venture to say probably over 75% of homes have some type of work performed without permits

If this was not true, Home Depot and Lowes would not exist.

[Dan Friedrichs]

I pulled the permit history for every house I've bought. It's free, and easy. I would imagine that others do too.

So in the case of a finished basement, how do you know it wasn't finished by the original builder?

[Pat Germain]

Respectfully, this sounds a bit dubious...

Who "required" this?

I sold a house in CO, recently, and beyond a line on the seller's disclosure form that said something like, "To the best of your knowledge, were permits obtained for any work that may have required them?" (which seemed to be worded in a way that intentionally provided plausible deniability...), no one asked or checked on any permits/renovations/etc.

You think the city is sending out an inspector on every home sale? Huh?

I'm just telling you what happened. I saw it myself. I talked to the owners of the homes myself. It wasn't city inspectors. It was home inspectors hired by prospective buyers who saw the basements and said, "No bueno!". This was before the crazy housing market when people were buying houses with no inspection. The real estate agents advised nobody would by the houses if the basements weren't up to code; which they weren't.

You think they ripped out their basements for no reason? Huh? (Just being silly here.)

[Dan Friedrichs]

I'm just telling you what happened. I saw it myself. I talked to the owners of the homes myself. It wasn't city inspectors. It was home inspectors hired by prospective buyers who saw the basement and said, "No bueno!". This was before the crazy housing market when people were buying houses with no inspection. The real estate agents advised nobody would by the houses if the basements weren't up to code; which they weren't.

You think they ripped out their basements for no reason? Huh? (Just being silly here.)

I could see that happening if the work was clearly sub-par.

But no inspector is looking up permit history and leading buyers to tear out perfectly good work just because the paperwork wasn't right.

[Pat Germain]

I could see that happening if the work was clearly sub-par.

But no inspector is looking up permit history and leading buyers to tear out perfectly good work just because the paperwork wasn't right.

It wasn't perfectly good work. It looked OK, but it was work that didn't meet code. The inspectors saw the issues. They asked the homeowners if they had pulled permits for the work. When the homeowners said, "Nope. No permits", they had to tear it all out.

I admit I'm not an expert in this area of construction, codes and permits. Again, I'm just sharing what actually happened. This was a big reason why I never finished the basement in my house. To do it correctly with all the necessary permits and to comply with all the codes was very expensive. Many of my neighbors did it on the cheap without any permits and it came back to bite them. My next door neighbors paid a competent contractor who did pull all the permits and comply with the codes and it all worked out. But yeah, it was very expensive.

So, overall, my point here is be very careful about a basement which was finished by the homeowner. It could be fine. But it could also be a problem.

[Lee Schierer]

The problem with home inspections is they only look at the surface. Generally speaking they don't look any deeper than what you can see by opening a door or walking around a room. The house my daughter purchased had a basement that was done by the home owner, supposedly a custom home builder. None of the basement wiring had the ground wires that were present connected to anything. The outside motion lights were mounted directly to the vinyl soffit with no junction boxes. Multiple ground faults were installed in a single circuit. One outside had been relocated and the wire extended to a new location. The wires were wire nutted together and hanging out from the soffit, again no junction box. I doubt that any permits were pulled for the work. She did ask for a $500 credit to have an electrician come in and fix the known problems, which the seller paid for.

[Brian Elfert]

I don't know who finished the basement in my current house. Probably a previous homeowner. The electrical had all kinds of issues. I've probably pulled more electrical permits myself than since the house was built. More than 50% of the electrical in the house was touched or replaced when I first bought the house and I pulled a permit. I have replaced the breaker panel, replaced the meter base, added solar, and added a standby generator. I got permits for everything. If someone pulled a permit for the basement bathroom the inspector should be fired.

I went to the city and got a copy of the "building file" before I bought the house. The city has digitized everything so they sent me a PDF of every single permit and other piece of paper they have on file for my house. The house was in terrible condition so I knew I would be redoing everything on the main floor. I didn't care about permits since it all had to be redone inside and out.

[Roger Feeley]

When we were moving from the Kansas City area to the DC area, we were discouraged by the high housing prices. I required a basement shop and we just weren’t finding anything. Land is so expensive in Fairfax county that homeowners finish every space they can. Unfinished basements are practically non-existent. I finally asked the realtor to look for badly finished basements. I reasoned that a badly finished basement wouldn’t increase the value of the house so I wouldn’t take a hit when I de-finished it. We never did find anything we liked.

But there was a happy end8ng. Our daughter and SIL bought a place in Falls Church with about 7/8 acre. We wound up building a house on their land so we live about 30 feet from their house. And I have a 1300sqft unfinished basement for the shop. I joke that the modest size was a compromise. I wanted a 4000 sq ft metal building. Yeah, that wasn’t ever going to happen.

[Curt Harms]

Respectfully, this sounds a bit dubious...

Who "required" this?

I sold a house in CO, recently, and beyond a line on the seller's disclosure form that said something like, "To the best of your knowledge, were permits obtained for any work that may have required them?" (which seemed to be worded in a way that intentionally provided plausible deniability...), no one asked or checked on any permits/renovations/etc.

You think the city is sending out an inspector on every home sale? Huh?

Some municipalities require a Use and Occupancy (U&O) permit before a new owner can occupy the building. I imagine the extent of the inspection varies but yes all sales in that jurisdiction are supposed to have one.

[glenn bradley]

First, "Regular Home Inspection was done, and no major issues noted." in my experience this generally means nothing. Home inspectors are not on the hook for anything that they miss. Around here it is a sweet job for anyone who has even moderate building knowledge. Second, your Realtor should be able to answer questions regarding how to get things made whole with the city and the tax man. If she can't find another realtor. There are too many realtors to tolerate anything but top performance from one.

In general I agree that if it is just walls it is pretty hard to go too wrong. On the left coast, as long as you are not modifying any engineered aspects of the home or changing the roof line you can do quite a lot. Add electrical and you can void any fire insurance claims you many have. Likewise, plumbing can void coverage of many things. If the buyer is handy the offer can be contingent on a few cutouts in the walls and ceiling NOT revealing anything troubling. They should be prepared to repair these areas or pay for someone to do so. It's cheap insurance.

We passed on the home-before-the-home we are in now when the seller refused to have a "real" inspection of DIY remodeling work done as a condition of closing escrow. We all get to learn from out mistakes. We don't all get to learn from others mistakes if we so choose. I will hope for nice, clean, easy progression for the potential buyers.

[Steve Demuth]

Based on all the comments here, I am definitely going to leave selling our home place to my kids, after I'm dead. I have personally done 100% of the plumbing, at least half of the construction, and way more than half of the electrical wiring on our farm, including the main house, since I started building it 40 years ago (before any kind of building permit was required here, for anything). The septic systems have of course been professionally constructed and inspected, and I've gotten permits and inspections on the electrical where it was required (really only for service entry builds) but overall, most of the place is owner built and maintained. I'm guessing, from what I'm reading here, and my experience selling my parents' almost new home across the state line, that realtors and inspectors are going to have a field day when this place moves.

[Brian Elfert]

I would have to be really desperate in selling my house to let someone start cutting holes in my walls. A home inspector is generally not supposed to do any sort of inspection that is intrusive.

[Prashun Patel]

I originally finished my basement without a permit and added a bathroom that I DIY'd. The issue for me is not the quality of the work, but the liability. In my town, once you are code approved in my town, you are not on the hook to make modifications as the code changes. If something is not to code, then when you go to make changes or sell, you are liable to bring it up to the current code. Further, should anything go wrong, there is a chance insurance won't cover an unpermitted change.

I ended up "coming clean" with the township and filed for a permit after completion. Fortunately I had to make minor changes.

If I were your kids, I'd ask the seller to schedule an inspection and to pay for any modifications.

If and only if the seller balks, I would then make a decision whether I want the home enough to take the risk.

[Roger Feeley]

I know because I bought a home that had been the basement finished by the owner. He was a blowhard who did the work himself. He heated and cooled the lower level by tying into the existing HVAC. He forgot one thing and that was returns so that lower level would never get warm. I finally installed a min split to make it habitable in winter.
When we built our house, I had the builder omit returns in my basement shop. The two hvac vents down there do a great job of heating and cooling. The return is a filter size hole in the stairwell. Everything else is really well sealed. I blow out or change the filter every few months. We don’t see any dust in the rest of the house.

[John Lifer]

I'm just telling you what happened. I saw it myself. I talked to the owners of the homes myself. It wasn't city inspectors. It was home inspectors hired by prospective buyers who saw the basements and said, "No bueno!". This was before the crazy housing market when people were buying houses with no inspection. The real estate agents advised nobody would by the houses if the basements weren't up to code; which they weren't.

You think they ripped out their basements for no reason? Huh? (Just being silly here.)
Again, I'll say BS. No home inspector can require anything. All they do is visual inspection and file a report with the person who hired them. If there was stuff pulled out, then there most probably was water intrusion and they pulled damaged drywall and studs. I've sold two homes, and the first one had an inspector that had about 50 junk items listed. I replace One Breaker outside and removed a hot water switch they didn't like. Everything else was fluff to prove they looked at it. The current home I paid for inspection just because it had chimney and a basement. He found nothing. I found several things since that he should have seen, but nothing of real concern. But it DOES totally depend upon the location. Here and in MS it doesn't matter. I've partially finished my basement since moving here, it already had bathroom and crap drop ceiling. Not worried a bit.

[Jim Becker]

John, you are correct...a home inspection as part of a real estate transaction is so that the buyer can ascertain if there are any glaring deficiencies and then either decide to bail or negotiate with the seller for additional consideration to help with the cost of remediation. IF it's listed as a contingency on the RE contract. The buyers of our previous residence did have an inspection done, but it was checked off as an "informational" inspection and was not a legal contingency on the property. They could not back out of buying because of anything in the inspection. The inspection we had done here at our new place was set up as a contingency...and we were able to garner an additional $7K off the offer price because of some things that really did need to be corrected. (our actual cost for that was much lower because I did the work after settlement) In neither case was a local jurisdiction involved with the inspections or transactions. The one exception to that here where we live is septic inspection which can affect a sale and is not optional for any property with on-site septic.

Where a local jurisdiction could come into play is where a new owner pulls a permit for a new project and it becomes obvious that something done previously was, um...not done correctly and/or without a permit where it was required to have one, during inspection of the new project in the same area so it's visible to the inspector. What requires a permit is absolutely "local" in nature.

[Curt Harms]

If there was plumbing involved, the risk is larger, because that's "the one thing" that pretty much universally requires a permit. In many jurisdictions, there is less concern or even no requirement if it's just floors, walls and electrical...it depends upon the specific jurisdiction. So your daughter and her husband, with the help of their Realtor, need to ask the jurisdiction directly what is required to heal any permit situation as that should be at the cost of the seller.

I would personally be more concerned about electrical screwups than plumbing screwups. I can't think of a plumbing problem that would result in a call to a plumbing equivalent of the local fire department.

[Jim Becker]

I would personally be more concerned about electrical screwups than plumbing screwups. I can't think of a plumbing problem that would result in a call to a plumbing equivalent of the local fire department.
I'm with you there, but many of the local jurisdictions don't require permits for incidental electrical work which is what commonly gets done in projects like this thread talks about. I will say that when we bought this house three years ago, the very first things I needed to fix were some VERY SCARY electrical things that the previous "weekend warrior" did...including wire nut splices in walls and romex run along a baseboard with spackle over it to hide it. And all of the outlets I've replaced were using "push in" connections on the back which was sketchy on some. That dates back to the original builder in 1993.

[Bill Dufour]

My town used to have a good site showing what you needed permits for or not. Now it is no way to know everything is call and find out. Used to be a 100amp panel or larger changeout required no permit. under 100 amp a permit was required. Has that changed. I have no idea.
BilLD

[Brian Elfert]

I don't think Minnesota technically allows any electrical work without a permit with one exception. My understanding is a contractor can remove and reinstall light fixtures and receptacles if they are replacing siding, drywall work, or the like. They can only reinstall the same fixture or receptacle. A replacement fixture or receptacle would technically require an electrical permit, but I am sure many contractors have installed new light fixtures and receptacles while doing other work.

Electrical permitting is a state thing in Minnesota.

[Perry Holbrook]

I don't think Minnesota technically allows any electrical work without a permit with one exception. My understanding is a contractor can remove and reinstall light fixtures and receptacles if they are replacing siding, drywall work, or the like. They can only reinstall the same fixture or receptacle. A replacement fixture or receptacle would technically require an electrical permit, but I am sure many contractors have installed new light fixtures and receptacles while doing other work.

Electrical permitting is a state thing in Minnesota.

I want to make sure I understand this. Are you saying that if you go down the electrical isles at Home Depot or Lowes, that all those people buying wire, light switches, light fixtures or wire nuts, etc, need to have a permit before they can use them? I'd say it would be very rare (except for some contractors) here for anyone in those isles having permits.

[Mark Wedel]

Permit requirements vary location to location. But a lot of people do minor stuff that technically require permits, but almost no one ever files a permit for it unless it is part of some larger work.

In many places, replacing an outlet or light switch does not require a permit. Adding a new outlet might, but lots of people might add one without a permit. Replacing a water heater probably does every place, yet home depot is selling those and I imagine a lot of folks are replacing their old ones and not pulling permits for it. But for those, at least after the fact, it is pretty easy to look at it and see if it was done safely/properly, so I'd be a bit less concerned buying a house with the homeowner replace the water heater without a permit vs them doing electrical or plumbing work which is hidden behind drywall.

[Brian Elfert]

I want to make sure I understand this. Are you saying that if you go down the electrical isles at Home Depot or Lowes, that all those people buying wire, light switches, light fixtures or wire nuts, etc, need to have a permit before they can use them? I'd say it would be very rare (except for some contractors) here for anyone in those isles having permits.

They sell all kinds of stuff at Home Depot, Lowes, and Menards that technically require a permit to install, or is simply not legal to install. For example, flexible water heater connectors are not legal to install in Minnesota yet you can buy them at pretty much any store that sells plumbing supplies. You could buy all the lumber and materials to build a house from Menards, but most jurisdictions would require you to have a permit to build a house.

It appears that homeowners can replace receptacles and manual switches without a permit. Anything that requires installing wire is technically going to require a permit. For example, you can replace an existing receptacle with a new receptacle without permit, but you need a permit to install a new receptacle in a new location. Not that plenty of homeowners don't install new receptacles and switches in new locations without a permit.

[John C Cox]

Check the local jurisdiction for the specific laws. Specifically, some places strictly require permits for everything and some don't. Further, some locations "Grandfather," unpermitted work after some period of time - often 10 or 15 years, while some never grandfather anything. I've been in both places. In nearly all cases, Caveat emptor strictly applies. Once you buy the place it is legally YOURS, and you are responsible for any and all problems unless there was specific wording in the contract that says otherwise..

With the current, massive housing shortage, that's hard because properties are often under contract the day they are listed... But... In the case where you don't have time to do proper diligence prior to the offer, you better protect yourself by putting exclusions in the contract.

The moral of the story is: Buyer beware. It is the buyer's responsibility to do due diligence and make their offer accordingly.