Good friends of mine have purchased a two story - 3 bedroom home in San Francisco a couple of years back and I have agreed to help them with a future renovation. I found out the home had an approved site permit for the addition of a garage and a first floor renovation, which they had hoped to revise and start construction on but never did.
They have learned several lessons about buying a property with approved plans, which I'll share with you below. Whether you are thinking about buying or selling a home with approved plans, whether you are an owner or real estate agent, here are a handful of questions to ask before you move forward with the property, especially if the changes are absolutely needed or used as leverage during sale negotiations.
What stage is the permit in, and what are the remaining costs associated with the permit? I our case the site permit was approved, but a balance of $18,000 had to be paid by the new owners for the permit to be pulled and for the project to move on to the next phase. That's a considerable price tag that was not brought up during the sale negotiations and not something a general inspection could have brought up. You bet the new owners felt cheated.
What additional permits are needed for construction? In the case of a major addition and renovation, in order to start construction you will need a site permit and a building permit at the least. Be aware these permits have their own separate review times and review fees. In our case, after pulling the $18,000 site permit, we would have had to create drawings for, and apply for a building permit, with estimated fees of of 20k.
What is the actual cost of construction? This is a big one. Real estate agents are not versed in construction costs and are bound to get it wrong, take their word with a grain of salt. The current owner might have not communicated the actual cost or the costs might have increased since the last bid (site permits can be renewed or extended for up to 3 to 5 years after approval). The best way to get an updated estimate on the pending work is to contact the contractor listed on the permit application and ask them for information. My friends' real estate agent mentioned a cost of $300,000, the listed permit amount was $250,000 while the actual cost estimate by the general contractor was a bit over $1,000,000. There is a big difference between $300,000 and $1,000,000.
Can you read the drawings and do you understand the scope of the work? Do you like the addition or renovation plans, or do you plan to change anything? We recommend you ask an architect to guide you through the existing plans, any changes you're planning to make, and to continue with building permit drawings and application. You have the option to contact the original architect or another one of your choosing.
Do you need this renovation to make the property suit your needs? This might be an obvious question, but if the answer is yes, you should take in consideration all the above before you make your decisions. It's likely the previous owners attempted to renovate but found the construction cost to be too high and decided to sell, and that's not something you want to find out after purchasing your property.
In my friend's case, the home was spacious and in good condition so they decided to continue to live in it as is, with minor upgrades, and did not make use of the previously approved site permit. Buying a property with approved renovation plans can be a good investment, but you should clearly understand the scope of work and associated costs, especially if you need the changes to make the property livable or if they are used as leverage during the sale negotiations. If you are ready to jump into the renovation process and want to save time in the design/ permitting process, then this is the way to go.
Corina Dumitrescu Architect (CDA) is a licensed architect and sole author of this personal blog. The content herein are her views and opinions to be used for information purposes only. CDA makes no warranty as to the accuracy or completeness of this content, especially if applied to projects not herein described. Always employ the services of a professional real estate agent and/or architect. Making decisions based on this or any other blog content alone should be done at one's own risk.
Σχόλια