The $299,000 Scott Avenue bungalow built in 1923 on the border of Echo Park and Silver Lake seems like a good deal, with two bedrooms, off-street parking and free-standing garage. There is, however, one issue: unpermitted construction. “There are extra rooms or offices in garage which was converted without permit,” reads the sales listing on Redfin. Should buyers keep shopping or is unpermitted construction not such a big deal? It’s an issue that comes up frequently when shopping for the older homes that predominate on the Eastside.
“We all know that on the Eastside people have been adding, changing and converting space for years,” said real estate agent Dan Ortega. “Back in the day it was just done and no one batted an eye. With the gentrification of the area came buyers who couldn’t understand the pro/cons that came with unpermtited space.”
Click on the link below to find out what Ortega and real estate agent Tracy King have to say about unpermitted spaces.
The issues/risk that a buyer can encounter is that if they ever go to resell the property, that unpermitted space won’t be counted in the [square footage]. Secondly someone could come from the city and ask them to tear down/correct the changes that were made. This typically can happen when the buyer goes to make improvements or significant changes, like adding a bath. But I think the most significant impact unpermitted [space] can have for the buyer is when [lenders appraise the home ] and doesn’t give any real value to the [unpermitted] space. I’ve seen it happen, the price comes in lower than the price agreed upon in escrow. This can kill a deal if both parties can’t come to some agreement.
Here’s the situation in the City of Los Angeles: there is no official city onsite inspection of a property being sold like there is in Pasadena. So unpermitted spaces like garage conversions are not as important. Historically, the only issue with unpermitted space was that an appraiser wouldn’t give credit for it in assessing the value of the property. In the past couple of years, some lenders have flatly refused to lend on property with unpermitted rooms because they felt that the liability of the work having not been done “up to code” was too great.
I had one deal where we had to convert a bathroom to a closet and a kitchen into a workroom so there would be no obvious potential to renting out the lower floor as an additional unit. Since there are so many illegal rooms in Los Angeles, completely enforcing a rule about them would be impossible. But the City needs money, so who knows what they may decide to do about this in the future? I always advise my clients to have any work done with permit to avoid possible future issues like this.
In the case of the Scott Avenue bungalow, the unpermitted garage work didn’t scare all the buyers away. A sale is pending, according to Redfin.
Photo from theMLS.com