Future Trends –

Re-Inspections and Increased Violations for Non Permitted Work

About 12 years ago a commissioner in the city where I live was running for reelection. His primary platform was he wanted to have re-inspections mandatory for every property that was sold in our city.  I mounted a strong campaign against his reelection and he lost his seat.

The commissioner cited the results of another local city which had recently started a similar program.  It was probably the first one in the state.  What he didn't mention was that as soon as the other city announced their re-occupancy requirements, home values fell 20% – 25%.  It took about a year for these values to come back. This was in a generally rising market so it was startling to residents.

The re-occupancy idea is supported by fireman because of the safety issues associated with carving of the interior of a property.  When firemen had to enter they couldn't be sure where the bedrooms and walls were in the property. Besides that electrical and plumbing changes could be potential safety issues. What wasn't discussed was the inspections were another revenue stream for the city.

Fast forward to today and more and more cities are embracing re-certification of single family homes when they are sold. But there are typically two types of re-inspections, first, a code enforcement office goes through the property and looks predominately at whether the floor plan is what it should be regarding the numbers of beds and baths. Some homeowners think that if you don't change the outside dimensions of the building anything goes inside – not so.

One recent example we saw was an original 3/2 converted into 9 bedrooms and three bathrooms.  It was a boarding house by any other name. This first type of inspection was quick and efficient.  Enforcement officers looked the other way for enclosed carports and even added bedrooms. But that has almost instantly changed in the past few months as the volume of home sales has slowed, permit volume is down and enforcement tactics have changed.

Secondly, for the cities that don't have mandatory re-inspections the simplest approach was to start by looking at all rehabbed homes for sale. These can be seen on the MLS® and by simply driving the neighborhoods and looking for agents' signs. Even looking on Realtor.com® would disclose listing agents' remarks about the spectacular rehab that had taken place. The code officers would schedule an appointment.  Then they start issuing violations for each of the upgrades the seller had made and often ones even done by a former owner.

Suddenly, like turning on a lightbulb, the city of Miami Gardens has instructed their enforcement officers to start issuing violations for non-permitted work when they do their re-inspections. Some rehabbers have worked this community for years and done many rehabs.  They have been shocked in their recent re-inspections to find that what was always overlooked in the past is now an issue that stops the sale of their beautiful rehab. Conventional lenders will generally not finance otherwise financeable properties if open permits exist at the time of closing

I suspect that within two years almost every city at least in the tri-county area will have some form of required re-inspection. The biggest issue is how long it takes to get the permits if you are borrowing hard money.  It is also a factor if your Handyman/Contractor can do the work properly and cost effectively. It is a challenge for both experienced and new rehabbers and will result in higher costs for every rehab and not necessarily higher profits if home prices stall or decline.

To your limitless success,
Dave Dinkel