Don't try to hide unpermitted work; full disclosure is first step

Question: We installed a new electric service panel on our home. We never got a permit, but everything was done to code by contractors. Now we want to sell the home. Can we simply disclose the improvements and hope that buyers don't talk to the building department about permits? If we get caught, can we continue the sale at a lower price? And could the city fine us for not getting a permit?

Answer: Your perspective as a seller is misguided and inappropriate. Your concern should be with ethical options, not legal ones. Instead of asking what you can get away with and what consequences will ensue if your getaway is unsuccessful, you should be asking, "What's the best thing to do in our current compromised position?" So let's focus on the answer to that question.

The only acceptable posture for a seller is one of complete, unconditional disclosure, as you would want and expect if you were the buyer. If you are not convinced of this from an ethical perspective, consider it on a purely selfish basis: The best way to avoid costly legal consequences after the sale of your home is to provide full and truthful information.

If you inform buyers that the electrical upgrades were done without a permit, they have three options: Ask for a price adjustment on the property, ask you to obtain an as-built permit from the building department, or cancel the purchase contract. Accordingly, you could reduce the price, get a permit or find other buyers.

A more proactive approach to this situation would be to obtain an as-built permit before listing your home for sale. This would solve the permit problem and eliminate the need for disclosure. The building department might exact a fine for performing work without a permit, but that would probably cost less than a price reduction on the property and certainly much less than legal fees for a post-escrow lawsuit.

Property appraisal: an inexact science

Question: Why does the appraisal value of a home sometimes differ from the listing price? When we bought our home, we paid a few thousand dollars more than what it was appraised for. When we eventually sold, we got less than the value determined by the appraiser.

Answer: The practice of determining the market value of property is an inexact science. This is particularly true in an active market, when prices are rapidly rising, or in a depressed market, when prices are falling. It is also true for properties whose characteristics are unique.