Owning a home can be costly in the best of times, so there’s no reason to waste money on expensive mistakes. Here are a few to avoid.
No Building Permit
If you plan to undertake major repairs or structural improvements to your home, you will undoubtedly need a permit to do so legally. Whether you live within the city limits or in the unincorporated part of the county, there’s a Planning and Building department for you!
When do you need a permit? For starters, any time you mess with a utility like gas or electricity, any time you do structural work, any time you build a retaining wall taller than three feet, and any time you build a decent-sized deck. If you simply plan to paint your bedroom a lovely shade of lavender, you need not alert the authorities, but if you build a walk-in closet, it’s permit time.
If you are caught without a permit when one is required, it can cost far more than the original permit would have cost. If your project is red-tagged (prevented from continuing), you have money tied up in an unfinished project and that project can deteriorate while you go through the permit-approval process. Also, many contractors plan their projects far in advance; your contractor may no longer be available by the time your permit comes through. Finally, though I hate to say it, sometimes the Planning and Building Department can actually save you from mistakes like completing renovations that aren’t structurally sound. That’s what permits are actually intended to do—keep everyone safe and within the confines of building regulations.
No Grading Permit
A kissing cousin to the building permit is a grading permit. I once knew a guy who purchased bare land where he planned to build a house. He cut a driveway straight up a steep grade, disregarding the rights of neighbors and the regulations that would have prevented the driveway from causing massive erosion. Guess what? He was forced to return the land to its original condition and the restoration cost him more than the purchase of the land.
Another expensive mistake is overbuilding or over-renovating. Some improvements are cost-effective and will yield a decent return, meaning that if you ever decide to sell your house, you’ll be able to increase the sale price to cover the cost of construction. However, you don’t want to build or renovate to the point where your house no longer fits with its surroundings. If you get a great deal on a lot in a starter-home neighborhood full of 1,200-square-foot homes, don’t build a 3,500 square foot castle. People looking for big homes want to live in neighborhoods where everyone has big homes. The cost of construction will be the same no matter where you build, but over time, a home that doesn’t fit in its neighborhood will not appreciate like it will otherwise.
Allowing Your Heart to Overrule Your Head
Whether you purchase a big house or a small one, the way you hold title can make a big difference in your financial future. Methods of holding title include tenants-in-common, joint tenancy, community property, community property with the right of survivorship, sole ownership, a married person as sole and separate property, and trusts. And the way you hold title affects how the ownership of a property can be transferred; how the property can be financed, improved or used as collateral; and how your taxes are affected.
May I suggest that if you and your brand-new significant other are swept up by the idea of owning a home together, but only one of you has any financial resources, consider putting the property only in his or her name. Be aware that even if you foot the entire bill for the down payment, the monthly mortgage payments, and all other costs associated with owning the home, you have no more legal right to the property than your significant other in the event of a break-up if you chose to own the home as joint tenants.
If you have questions about property management or real estate, please contact me at email@example.com or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery. To see previous articles, visit www.selzerrealty.com and click on “How’s the Market”.
Dick Selzer is a real estate broker who has been in the business for more than 45 years.