Open Permits: What Homebuyers and Sellers Need to Know

Open permits can significantly impact a real estate transaction when buying or selling a home. Whether you’re a seasoned buyer or seller, understanding the implications open permits can have in a real estate transaction is essential. In this comprehensive guide, we’ll take a closer look at what open permits are and offer guidance on handling them if encountered during the home buying or selling process.

Understanding Permits

What is a Permit?
Anytime a homeowner wants to make alterations to their property, whether it’s installing a new roof, windows, doors, fence, patio, or an addition to the property, they or their contractor must first obtain a building permit before commencing any work.

Currently, some home improvements, like replacing kitchen countertops or flooring, might not necessitate a permit. However, anything that poses a potential “safety hazard,” such as installing an inground swimming pool, usually requires a permit. If homeowners are unsure whether their project requires one, it’s advisable to reach out to the local building department for clarification.

Why is a Permit Required?
The requirement for a permit in construction projects exists for a multitude of reasons with its primary aim to ensure safety standards are met to prevent potential hazards. Additionally, the permitting process serves to protect homeowners who hire a contractor, a permit will ensure that the work was properly done and in compliance with established regulations.

By adhering to code guidelines throughout the permitting process, the completed project is guaranteed to meet minimum safety standards, which in turn will ensure the safety of the homeowner and any future homeowners of the property.

What is an Open Permit?
Now let’s answer the question at hand, “What is an open permit?”

An open permit is exactly as it sounds – a permit that has been opened but has not yet received final approval from the building department or relevant authorities, and has not been officially closed out.

Why Do Permits Remain Open?
Several factors could contribute to a permit remaining open. Perhaps the homeowner or their contractor neglected to follow the necessary steps to close out the permit, despite the completion and inspection of the project or maybe they never even got as far as having an inspection.

Another possibility is that the project failed inspection, and the identified issues were never addressed, resulting in the permit remaining open. In rare cases, the building department may have overlooked processing the final approval in their records, leaving the permit unresolved. This is one of the many reasons why homeowners should maintain all relevant documentation pertaining to their home, especially permits and warranties.

Open Permits in a Real Estate Transaction

An open permit can easily stop a real estate transaction in its tracks and in some cases prevent closing altogether. Let’s take a look at the frequently asked questions and answers regarding open permits in a real estate transaction

How Do Open Permits Affect Buyers and Sellers?
For buyers, open permits can raise concerns about the quality of work done on the property and whether it meets building codes and regulations. Additionally, lenders may be hesitant to provide financing for a property with open permits, which can complicate the buying process.

For sellers, they may encounter difficulties selling their property if there are open permits associated with it. Open permits could lead to delays in closing the sale or even cause potential buyers to back out of the deal altogether. Sellers may also be required to address and close out open permits before completing the sale.

Is the Closing Company Required to do a Permit Search?
Unless stipulated in the contract many closing companies will not conduct a permit search. So it’s important for buyers to include a permit search clause in their offer as an additional layer of protection, especially if it is not already present, as not every closing company will undertake this task automatically.

What Happens if an Open Permit is Discovered?
If an open permit is discovered during the transaction the seller needs to take all necessary measures to get the permit closed before closing. If they or their contractor are unable to close out the permit before the scheduled closing date there are a few possible outcomes.

1. All parties could agree to extend the closing until the permit is closed.
2. Depending on the contract terms, the buyer could terminate the contract and receive their entire escrow deposit back.
3. The buyer could choose to proceed with the purchase despite the presence of open permits on the property.

Who is Responsible for Closing an Open Permit?
Ultimately, the seller is responsible for closing the permit even if they aren’t the ones who opened it. If the seller hired a contractor and they are the ones who opened the permit the seller can request the contractor close it.

However, not all contractors will make it a priority, and given the time constraints of a closing date, relying on them to complete the permit closure may not be feasible. Additionally, the contractor may no longer be in business or sold the company and the records no longer exist. So it’s always best for the seller to take the helm and oversee the entire process of closing out the permit until they have the closed permit in their hand.

Can an Open Permit that Failed Inspection be Closed?
No, if the permit remains open because it failed inspection those issues will need to be corrected and pass inspection before the permit can be closed out. If the seller is unable to correct these issues on their own they will have to call out their original contractor, if they had one, or possibly hire a new one to fix the issues.

Codes change, so if an AC was installed 7 years ago and at that time passed inspection but the permit was never closed depending on the current codes the AC may need to be brought up to today’s standards. Yes, even if the AC passed inspection 7 years it may not pass inspection today. So sellers should have their contractor or another on standby until they’re able to get the closed permit.

Can a Buyer Purchase a Home with Open Permits?
In some instances, a buyer does have the ability to purchase a home with open permits. However, it is highly unlikely they will do so for several reasons.

1. They run the risk that the work associated with the permit was not done properly, leaving the buyer responsible for correcting any deficiencies at their own expense.
2. Even if the work was done correctly, there may still be costs incurred to officially close out the permit, particularly if it has transitioned from an open to an expired status – an expired permit essentially indicates that it is still unresolved. There is often an expense associated with reopening a permit.
3. Failure to properly close out permits can pose an issue for the buyer when they decide to sell the property.

How Can Sellers Avoid Open Permits When Selling?

To steer clear of open permits during the home selling process, there are proactive steps sellers can take before listing their homes for sale. They should start by contacting their local municipality to see if any open permits are attached to their property, depending on their municipality they may be able to obtain this information online. However, it’s always better to double-check with a live person.

Even if the seller didn’t open any permits during their ownership doesn’t mean the previous owner didn’t. Occasionally, an open permit from the seller’s initial purchase might have been overlooked or considered unnecessary at the time, resulting in the permit not being disclosed. This situation can leave the current owner with an unresolved open permit.

As the seller looks for open permits, they should also check for closed permits. This not only enables them to share this information with the buyer but also serves as a reminder of installation dates for items like a new roof or windows.

By addressing any open permits beforehand, sellers can confidently list their property without this issue looming over the transaction, providing peace of mind and simplifying the selling process.

Final Thoughts

Understanding what open permits are is crucial for both homebuyers and sellers. Whether you’re considering purchasing a property or listing one for sale, being aware of the implications of open permits can greatly impact the success of your transaction. It’s equally as important to know how to close out open permits if one should be found.

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About the Author

Top Wellington Realtor, Michelle Gibson, wrote: “Open Permits: What Homebuyers and Sellers Need to Know”

Michelle has been specializing in residential real estate since 2001 throughout Wellington Florida and the surrounding area. Whether you’re looking to buy, sell or rent she will guide you through the entire real estate transaction. If you’re ready to put Michelle’s knowledge and expertise to work for you call or e-mail her today.

Areas of service include Wellington, Lake Worth, Royal Palm Beach, Boynton Beach, West Palm Beach, Loxahatchee, Greenacres, and more.

Open Permits: What Homebuyers and Sellers Need to Know