When you first look at a home for sale, you often don’t get the full picture until you do careful due diligence, which can reveal things the seller or even the listing agent never knew. And the things you discover can significantly impact the home’s Fair Market Value. I have some clients who recently fell in love with a place that was billed as a “3 bedroom, 3 bath, 1759 SF home with detached 2nd unit.” But the home felt smaller than 1759 SF and only had 2 bathrooms, so it appeared that some liberties had been taken in its description on the
MLS.
A cursory review of the County Electronic Record for the property listed the home at 1399 SF, with 3 bedrooms and 2 baths, which told us that that the extra 360 SF and bathroom was likely attributed to the 2nd unit, but it didn’t tell us whether the unit was legal. After all,
the County doesn’t distinguish whether the structures they tax are permitted—this is only determined by comparing the property’s private historic records at the Assessor’s Office with the permit history at the Building Department.
The Assessor’s file for this particular property showed that back when they started keeping records on it in 1946, the house had just 2 bedrooms and 1 bath, with 912 SF total living space. By 1972 it had expanded to 1039 SF, and the 2nd building had been added. By 1980 an attic conversion was picked up that brought the home’s overall size to the 1399 SF now reflected in the Electronic Record. The file also included notations of several permit numbers that had been reported to them along the way, which was encouraging but still not
conclusive.
A trip to the records room at the Building Department revealed none of the various permits were actually for living space, and there was no record of any permit for the attic conversion to a second story master bedroom. We also saw that, while a permit had been pulled for an “art studio,” it specifically excluded the building from being connected to plumbing. And a look at the actual permit card revealed that the permit had never been signed off and was eventually voided—so the “2nd unit” referenced in the MLS was, in fact, completely unpermitted.
Fortunately, under new County guidelines it appears likely that the ADU could be legalized, however our septic consultant determined there would need to be $39,000 in upgrades to the septic system to make it eligible. There would also be over $20,000 in fees to permit both the ADU and the additions to the house. On top of these, there would be costs for plans and engineering, as well as likely structural retrofits for the attic conversion, and
fire sprinklers due to the home having grown by over 53% from its legally permitted size.
In all, it was determined it would cost well over $80,000 to cover the bare minimum needed to make the property legal as it had been originally represented, and a partial price adjustment was negotiated that both sides agreed was acceptable. More importantly, the deal can now close with all parties having the benefit of knowing that these issues have been correctly disclosed to ensure a proper and well-informed transition of the home to its
new owners.
