DIY renovations can save you a lot of money, but if skipping a building permit was one of the ways you cut costs, it could cost you in both time and money when you go to sell your home. It can even scare off a buyer and jeopardize your sale.

What Do You Save When You Don’t Get a Building Permit?

I recently took a listing on a home where the homeowners finished the basement and did not pull a permit. Like many homeowners, they did the work themselves to save money.

According to HomeAdvisor.com, the average cost in the United States to finish an unfinished basement can range from $5,500 (DIY; less than 700 square feet) to $35,000 (professional; more than 1,000 square feet).

Let’s take Arapahoe County for example. The permit for a basement finishing project valued at $15,000 costs roughly $415. Arapahoe County’s formula for the permit fee accounts for the total project valuation, a base permit fee of $63.15, a plan review fee of $41.05 where applicable, and a use tax where applicable. (Additional site-specific development fees may also apply for new buildings and additions, but we’re only discussing a basement finish here.) And where there’s a “plan review fee,” there must of course be plans. A good ballpark figure is $1,000-$2,000. So let’s assume these homeowners “saved” $2,500 by doing the work themselves without a permit or plans.

What Can It Cost You When You Don’t Get a Building Permit?

The answer is: everything from additional cost and hassle all the way up to the sale of your home.

Let’s go back to my listing with the DIY basement finish. To be honest, I didn’t even think about it until the appraiser asked. Then a red flag went up. Here’s why. If the buyer for your home is financing the purchase with a VA or FHA loan, the appraiser HAS to note whether or not a permit was pulled. No permit = red flag. That alone can scare off a buyer.

Further complicating things was that this basement was finished as mother-in-law unit [complete with a bedroom, bath, living area, and kitchenette]. This technically made it an ADU — additional dwelling unit. This matters because this change turned the home from a single family home to a multifamily home, subject to different requirements and tax treatment. Word to the wise: installing only a sink, cabinets, countertop, mini fridge, and microwave can help you avoid it being classed as a kitchenette.

Fortunately we had a nice appraiser who gave me the heads-up. I instructed the sellers to go down to the permitting office and apply right away so as not to hold up the appraisal process or ultimately jeopardize the closing.

In Colorado, it is possible (and sometimes not even all that difficult) to get a permit after the fact. In the January 2019 monthly permit report from Arapahoe County, there were 15 permits listed for basement finishing, with one of those being for “basement finish, previously finished without permit.” Procedures and fees will vary by county.

You can also find stories online of homeowners who skipped the permitting process and then had to either tear out the work completely once discovered or open up walls and floors for inspections. Another factor to consider (although not directly related to selling your home): your homeowner’s insurance may not cover you for loss of or damage to non-permitted work.

My professional recommendation as a Realtor® is to contact your city or county *before* doing any renovations so you can know the requirements and choose your level of risk tolerance.

When Should You Consider Getting a Building Permit?

According to TheSpruce.com, most towns and cities require you to pull a permit for the following types of projects:

• Removing a load-bearing wall
• Changing the roof line
• Expanding the house’s “envelope” (i.e., adding square footage; this includes garages and carports)
• Installing new wiring or adding electrical circuits
• Installing a fence over a certain height (e.g., over 6 feet)
• Parking a roll-off dumpster on the street (depending on size, many can be parked in your driveway and will only require advance notice to your HOA or compliance with their guidelines)
• Removing and rebuilding a deck, or adding a deck
• Pretty much anything involving your sewer line
• Adding a driveway
• Adding new windows or doors where there previously was no opening
• Adding a fireplace or converting one from wood to gas
• Installing a new or replacement water heater, air conditioning, or furnace unit
• Replacing a roof

Check the full article on TheSpruce.com to see what types of projects *might* require a permit, as well as which ones probably won’t. If you have questions about whether or not getting a permit will affect the sale of your house, get in touch with me! You can reach me at 303-204-6494 – I’m always happy to help!