You can sell a house with an illegal apartment, but there may be challenges with the sale process. An illegal apartment is considered unpermitted work, and you are required to disclose it to potential buyers.
A few buyers may consider it an opportunity to earn a rental income that can help them with mortgage payments or property maintenance.
However, many potential buyers will be hesitant to buy it, resulting in the property sitting on the market for too long. Those open to buying the property as-is may also negotiate for a lower sale price to enable them to deal with unpermitted work.
Below is a look at some of the reasons potential buyers may be hesitant to buy a house with illegal work, the best option for selling the house as-is, and why you may want to consider getting rid of the illegal apartment or acquiring a permit for it.
Whether it is an in-law suite, a garage apartment, a basement apartment, or an apartment in the attic, as long as you do not have the required permits, it is an illegal apartment. In most states, it violates the local zoning ordinances.
The International Building Code stipulates requirements for constructing various residential spaces. For instance, basement apartments must meet specific criteria in terms of minimum ceiling height, number of windows, and exits, and may also be required to have their own utility meters. If the construction is not permitted, there may be concerns about whether the recommended safety standards have been met.
There has been an increase in the demand for affordable apartments, which has led to many homeowners’ setting up illegal apartments. While it may be normalized in your area and most homeowners have not had issues with their tenants, if your tenant gets injured on your property, you are liable for it. If the injury is fatal, you may face a criminal charge that could lead to jail time.
Furthermore, if your local government learns that you are renting part of your home illegally as a rental unit, you will be required to evict the tenant. An eviction like this could result in a penalty on the landlord for breach of contract. On the flip side, if the tenant causes damage to the property during their tenancy, it is unlikely that a court will award you damages.
Some lenders are unwilling to offer financing on a house and real estate transaction with an illegal unit. If a lender is willing to finance the house, their inspector may require changes to be made to the illegal apartment. As such, a house with illegal work eliminates most mortgage buyers from your pool of potential buyers.
For example, they may require that water and gas lines are disconnected from the illegal apartment so that it is appraised as an extra room or storage space. Or, they may require the seller to get permits for the illegal apartment.
Getting a permit may be a lengthy and costly process. If the new owner wants to legalize the illegal apartment, they must bring it up with the local municipalities. They may also be required to make structural changes to the apartment to meet the local code requirements.
If the changes are extensive, such as tearing down walls, it will take time and cost them heftily. Furthermore, the governing municipality may impose a fine on the new homeowner, even though they are not responsible for the initial construction.
An illegal apartment can compromise the eligibility of the house for insurance coverage. If the house already has home insurance, the insurer may deny a claim citing unpermitted work that does not meet the local building code standards.
An illegal apartment may have additional tax implications for the new owner. Typically, when renting a property, you are required to pay an income tax. The tax burden is transferred to the new owner upon closing the real estate sale.
How to find a cash buyer for your home or apartment? The best option for selling a house with an illegal apartment is as is to a cash buyer. They will negotiate a lower sale price than fair market value, but you won’t have to make any changes to the house.
The sale process is easy. You do not have to list the house. Instead, contact a reputable cash buyer in your area directly. They will view the house and determine how much they are willing to pay. If the price offered is satisfactory for you, accept the offer and go on to close the sale.
This type of real estate transaction is cheaper as no listing fees or real estate agent commissions are involved. However, you may want to involve a real estate agent or attorney in the closing process to ensure everything is done properly. Also, use an escrow service to process payments to avoid being scammed.
The other option would be to get permits for the illegal apartment and then sell the house at the market value. You may be able to list the house at a slightly higher price as you would indicate that it has a permitted legal unit that the new homeowners can rent out to make extra income. Getting permits also widens your pool of potential buyers to include mortgage buyers.
The main downside to this option is that it is likely to take several months to get permits, which could affect your listing timeline. Depending on the scope of unpermitted work on the apartment, you may need to make extensive changes that may be costly and time-consuming.
When selling a house with unpermitted work, assess your best option and move forward with it. If you want to sell the house with the illegal unit quickly without making any changes or getting permits to make it a legal apartment, contact a cash buyer near you to get an offer. However, be prepared to sell the house at a much lower price than the market value.
If you are in Denver, contact Webuyhousesindenver.org to get a quote for your house with an illegal apartment. On the other hand, you can make the required changes and get permits for the illegal apartment, then sell at market value or slightly above the market value.
If you’re wondering how to find a cash buyer for your home, WeBuyHousesInDenver.org is your solution to selling your house, because as Denver’s number 1 cash home buyer we will buy any house in any condition so if you want a cash offer on your property simply give us a call or fill out an online form and our team of experts will get to work, quick smart, to help you get your house SOLD!
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