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So, you’re preparing to list your house. You’ve fixed that leaky bathroom faucet. You’ve scrubbed and decluttered, and there’s a fresh coat of paint on the walls. You’ve got paperwork, including your survey, taxes and utility bills, all ready to go.

You may think you’ve done your due diligence. But in our experience, there’s one thing that seller’s often forget: closing or disclosing open renovation permits.

Many buyers won’t ask about them, so they may not seem like a big deal. But trust us, they can be. In this post, we’ll look at some of the consequences you could face if you try to sell your home without taking care of past open permits.

 

What exactly are open renovation permits?

Unsure if there are open permits for your home? Here’s what you need to know.

When a homeowner undertakes a renovation, such as adding a new room to their house, they need to apply for a municipal building permit. A permit is also necessary for some smaller improvements, such as plumbing or electrical updates.

These permits exist to ensure that the work performed meets Ontario building codes and city zoning laws. The application process can be a hassle, but it’s not uncommon for homeowners to forget that they’ve applied in the past.

Perhaps you applied, then realized you didn’t need to do the work after all. Maybe you did the work, but calling for a final inspection and formally closing your permit completely slipped your mind. Either way, you should know that open permits can create some major headaches for you as a seller.

 

Buyers can back out—or even sue

In some cases, having an active permit for your home can prevent you from closing a deal. Here’s how.

A real estate deal becomes binding once the contract is signed and sealed. What many sellers don’t know is that a buyer can sometimes back out of a deal even after signing.

That’s because some preexisting issues—such as liens and ongoing work orders—can prevent a seller from delivering “clean title” for a home. Active permits can fall into this category. And Ontario courts have found that an open permit is a legally-acceptable reason to back out of a deal.

You should also consider the potential for future lawsuits. In some cases, failing to disclose property defects (including work that’s not up to code) could result in major costs to the person who buys your home. It’s true that disclosure issues are tricky, and claims aren’t always legally valid. That said, when you’re less-than-transparent about the condition of your home, there remains the possibility that you could be sued down the line.

These are lessons you don’t want to learn the hard way. Disclose, and you may be able to negotiate a deal that works for everybody. Buyers are often willing to take on the responsibility of closing out permits themselves in exchange for other concessions.

 

Problems with lenders

Another way open permits can quash your transaction? Lender appraisals.

Most real estate contracts include a clause stipulating that a deal won’t go through unless the buyer is able to get the necessary financing. This condition, which reduces risk for the buyer, may be part of the deal you strike when you sell your home.

If you’ve ever taken out a mortgage, you know where we’re going with this. Lenders perform appraisals before they provide financing. If a lender discovers an open permit during the appraisal process—well, you guessed it. Your buyer might not get the mortgage they need to buy your home. 

 

What to do about open renovation permits

If you have any open renovation permits, closing them before selling just makes sense. Consider it part of your due diligence.

If the work you’ve done isn’t up to code (or it’s become outdated since you first applied for the permit), there’s a possibility that you’ll have to remove it. You may also have to pay a penalty. But buyers are often willing to take on these responsibilities as part of your larger agreement.

One last point: let’s not forget about the golden rule. Treat your buyer the way you’d like to be treated. Imagine going to renovate your home and discovering you can’t do so until you close a permit opened by a previous owners.

As real estate agents, we really do care about the people on both ends of a transaction. We want buyers to be happy with their purchases, even when we’re not representing them. When it comes to the people you’ll be selling to, we’re betting you’ll feel the same way.

 

Looking to get the best possible price for your home? We’d love to help! Get in touch and we can walk you through the process.

 

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