A Catch 22 Position
In just about any house you go into, you can find some upgrading or repairs that have been done which require permits and approvals. You'll also find that there are missing permits and approvals for some of this work in almost every house you go into! It's very common because there are very few homeowners who know that permits and final approvals are needed for all repair work done in a house. Many contractors don't bother with the permits, unless the homeowner insists on seeing them upon completion of the job. When you or your client find missing permits, just tell the client it's a common problem. Don't make the client think this is the only house without all valid permits and approvals. Just tell them to find out what is required to obtain the final approvals from the town for the work done.
You'll also find that there are missing permits and approvals for some of this work in almost every house you go into! It's very common because there are very few homeowners who know that permits and final approvals are needed for all work done.
Sometimes your clients will ask you, "What will happen if I do go to town hall to check about valid permits and approvals for the finished basement or attic, the addition, deck, pool, extra apartment, etc. and they aren't on file in the building department." Well, if you or your client tell the building inspector that you checked for the permits and approvals and you can't find them, then you might raise a red flag in his mind. This could lead to the building inspector going to the subject property. The building inspector could file a building code violation against the property for the work done. A violation could be issued because there are no permits on file. Usually the only way to get building violations removed is to have the work pass the local building code standards. What will happen is the building inspector will tell the homeowner that if the work doesn't meet the local building code standards, then they must hire a licensed contractor to make the necessary repairs. Repairs will be needed to bring the work up to meet the minimum standards before a valid permit and approval can be obtained and the violation will be removed.
You can run into serious problems in certain situations when permits and approvals need to be obtained after the work has already been done. One case is when the repair work was not permitted by the building or zoning codes. For example, the local codes may not allow the homeowner to finish a basement or attic to use as livable space, build a small addition or garage, etc. When this occurs, the only option is to remove all of the work done. The building inspector can't approve something that is against the law of the town! I've had clients that took my advice and checked town hall prior to closing. They found garages that were built too close to the neighbors property line; pools that were not allowed on the site; additions and enclosed porches that had to be dismantled; finished basements and attics that were against the zoning and fire codes, etc. None of these problem conditions could be approved without getting zoning variances and changes made to the building and fire codes. In order to sell these houses, the sellers had to dismantle all the repair work done to the house and site. That can turn into a nightmare and take a lot of time, money and aggravation to accomplish.
A more common problem when permits need to be obtained after the work has already been done occurs when the work is not accessible to view. For example, if there has been some electrical wiring, plumbing or foundation repairs. Usually this type of work will be sealed up after the repairs are completed. The building inspector can't sign-off on something that he can't see! As a result, the only way to get the permits and final approvals will be to open up the walls, floors, ceilings, etc. so the inspector can view the repairs. I've had this situation come up on many occasions when I notified my clients about missing permits. This also can turn into a nightmare.
So it can be a Catch 22 for the client. If they don't raise a red flag at the building department, then the missing permits might not create a problem for the closing when the client purchases the property. However, if your client doesn't clear up this matter prior to buying the house, then it might come up when he goes to renovate, refinance or sell the house down the road. Then your client will be stuck wasting his own time and money fixing a problem that someone else had created! I wouldn't take the chance if I were buying the house. From your standpoint as the appraiser, you're required o mention the building code violations that you know about in your written report. It's true that only an inspector from the local town hall can do a building code inspection. However, you still need to inquire about any known violations. You also must take any violations into consideration when estimating market value because it will have a negative affect on the purchase price offered by a typical buyer. So whether the client clears up the problem isn't your concern. However, you must mention it in your report to CYA.