Saturday, June 29, 2013

Cheap, Shoddy Rehab Work, Improvements Made Without Pulling Proper Permits, Encroachments, Unexpected Red Tags Among Potential Hazards Facing Novice Prospective Homebuyers When Dealing With Foreclosure Flippers

From the San Francisco Bay Area, the San Francisco Chronicle reports:

  • There's a surge in Bay Area homes being remodeled, as run-down foreclosures find new owners. Some of those new owners are house flippers, whose goals are to fix up and resell a property as quickly as possible. That can mean cutting corners by skipping permits and inspections for the renovations, city building officials say.

    "Time is money when you're flipping a house," said Dan Marks, Vallejo's interim economic development director. "Especially in this crazy market when we have no idea how long this (house-buying) frenzy will last. Timing is critical for these guys, and going through the permit process takes time."

    While non-permitted work is a perennial issue for cities, the sheer volume of dilapidated properties changing hands in recent years has spurred a big increase in unpermitted work, building officials say. The fallout can include slipshod construction standards, big headaches for new owners, and loss of revenue for cities. The problem is big enough that Oakland passed an ordinance requiring investors to register properties and comply with city rehab codes.

    "With the volume of (remodeling) work increasing as it is, I would expect work without permits to follow," Ed Sweeney, San Francisco deputy director for permit services, said in an e-mail. "The developer who is flipping houses is under added pressure to bring a product to market. Since the work being performed is interior ... a sense of security is there" about not being caught.

    Holding the bag

    Short-staffed building departments throughout the region said they rely on complaints from neighbors to catch unpermitted work in process, although inspectors keep an eye out when they're driving through town.

    "The house flipping is still going on here and we still find some in our travels performing inspections," Gary West, Vallejo's chief building official, said in an e-mail. "We have found contractors performing substandard work and converting unoccupied areas to living spaces. The new property owner is left holding the bag on getting the work legalized, which is sometimes a problem or not allowed."

    One contractor was found working on 12 different homes with no permits, he said. In another case, an addition to a home had to be removed because it encroached on the house's front "setback" area, even though a recent purchase had included that square footage as part of the home's value.
  • New Oakland ordinance

    A new ordinance requires investors who purchase foreclosures to register the properties with the city and do all rehab work to city standards, said Margaretta Lin, strategic initiatives manager for the Department of Housing & Community Development.

    "We're targeting investors who weren't planning to do the rehab work up to code," she said. "We know the foreclosure stock has a lot of deferred maintenance issues. If investors are buying a property that was in foreclosure, there's a high likelihood that it needs rehab work."

    Besides flippers, the new law targets investor landlords to make sure they don't simply rent out run-down properties without bringing them up to code.
For more, see House flippers often skip city permits (requires subscription; if no subscription, go here, then click appropriate link for story).

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