I don’t want to freak you out, but this topic is very important!

The process of buying or selling a home involves a myriad of considerations. One topic that seems to go overlooked, or is at least glossed over, is building permits. Permits play a pivotal role in checking that construction or renovation work complies with local regulations, zoning ordinances and safety standards. What a lot of people don’t realize, or don’t talk about enough, is that unpermitted work can end up giving you a great big headache.

Why permits are required:

First, it’s Oregon law that you obtain permits on much of the typical work done on a home. Even if you are doing the work yourself as the home owner, this rule applies. These laws are based on safety, ensuring the work meets minimum building standards for the safety of current and future property owners and occupants.

The risks of unpermitted work:

Unpermitted work can lead to costly repairs, revisions, liability and safety issues. In some cases, it can also void homeowner’s insurance. Ultimately, the liability falls on the current homeowner.

Where it can really bite you in the butt is when selling a property or doing a project on your home that requires a building permit (think: kitchen remodel, adding a bathroom, finishing out a basement, etc.). It’s becoming more common that buyers, and/or their real estate agent, do public record research to see if a home has the proper permits finalized within the inspection period. If something minor doesn’t have a permit, this is often overlooked. However, major work on a home is being flagged more often in a transaction and can cause a host of issues including requests for a price reduction, requiring that permits be obtained before closing or backing out of the transaction entirely.

Major unpermitted work on a home is becoming more and more tolerated than back when I started in this business 20 years ago. I believe this trend will continue and when we transition back to a buyer’s market, it will become an even bigger headache for homeowners selling a home that has significant unpermitted work. That being said, don’t despair if you do have unpermitted work! I have sold many of homes with this issue and there are a few important things I suggest:

Be transparent about your knowledge of unpermitted work.
Talk to your real estate agent in advance of listing to see if it’s realistic to get the permit closed before you list your home. In some cases, it’s simply not an option, but many times it’s not as big of a deal as you might think.

As a buyer, it’s very important that you make sure to check any home’s permit history during your inspection period (more on how to check permit records below). Especially if the home looks to have anything that isn’t showing up on the tax records, I would highly encourage a buyer to look into this topic as part of their due diligence.

So, when are permits required and how do you check for them?

When permits are required:

Permits are required for any new construction or alterations and additions to existing buildings. This includes: electrical, structural, plumbing and mechanical. Some of the common work that requires a building permit:

Building a one-two family dwelling
Finishing an attic, garage or basement to create living space
Building, demolishing or adding a room, garage, shed, or other enclosed structure attached to a house
Adding or enlarging a porch/patio cover, carport or other open-sided roofed structure*
Enclosing a patio cover, porch or carport
Cutting new window or door opening or increasing the size of existing openings
Moving, removing or adding walls
Building a deck (more than 30 inches high)
Putting up a fence (more than six feel high)
Moving more than 10 cubic yards of earth

*with a cumulative area greater than 200 square feet that is attached to a house

How to check permit records for a specific property:

PortlandMaps.com is a fantastic resource for permitting and beyond. Type in the address and you’ll be able to see various information connected to the property, including permits. Please note that this only includes information available on permits issued on or after June 1, 2012. It’s also not 100% accurate. In order to get the most comprehensive and accurate information available, fill out a Research Request Form via the Bureau of Development Services.

The Bureau of Development Services (BDS) oversees the permitting process and ensures that all structures meet safety and zoning requirements: portland.gov/bds | 503-823-7310 | bds@portlandoregon.gov

Building permits, or lack thereof, are just one of the many things you should be aware of when selling, but especially when purchasing, a home. I can help you every step of the way if you are thinking about buying, selling or both this coming year! You can get in touch with me at traceyhenkels@gmail.com or 503.715.6140.

Photo Credit: Urbanology Designs, https://www.urbanologydesigns.com/

ADUs are a hot topic because we’re rethinking the way we live.

If you’re considering buying a home with an ADU or one that has potential for adding/improving an existing ADU, or creating one for your existing property, read on. Maybe you like the idea of offsetting that mortgage with a bit of rental income? Not only do conforming loan guidelines now allow buyers to use rental income to qualify for homes with ADU’s, there are more reasons to get educated on ADUs than you can shake a stick at. My hope is to provide you with a concise and usable guide to the latest in modular building (ADU’s, Income Units, etc.)

Why, and who’s doing this? ADUs can build wealth, create in-fill housing, reduce displacement, and enhance neighborhood resilience. People are building ADUs on their property to:– Expand living space for the family or extended family (ie. a place for a parent to live so they can be nearby but not living in the room next door, or a place for the grown child to return to after college without having to be right on top of each other).
– Downsize to a smaller living space without giving up your property rights.
– Have an office or studio workspace easily accessible and close to home.
– Offset or pay for mortgage. Some owners opt to remain in the house and use rental income from the ADU to help offset mortgage while others choose to move into the ADU and let the renter pay for most of or even the entire mortgage.

What is an ADU?

The term ADU stands for Accessory Dwelling Unit. ADUs are secondary homes built on a single family residential lot. It can be tricky to understand the differences between tiny houses, granny flats, and backyard cottages–and that’s simply because all of those structures can serve as an ADU, whose purpose is what defines it. What an ADU provides is a flexible living arrangement that can extend the value of a home, and the purpose of it is to serve as a complete residence, everything you need to live, basically: to-code places to sleep, cook, and bathe.

Ways to ADU:

ADUs can be many forms: detached garage, basement conversion, prefab unit — an addition to an existing home, or even a detached addition to a primary residence.

So let’s first consider: for what use? Multi-gen use for housing family? Use it as a place for in-laws or college-age kids to stay? Or creating a space to house the occasional guest? Whether creating or buying existing, having additional office or studio space that could be converted to a short term or year lease to provide rental income later — is a very good idea, and there are tons of ways to approach it.

All this factors on your goals, of course. Do you want more internal space (i.e. basement use) or do you want more yard space? Rental income? Downsize and live permanently in the ADU and rent out the main house?

There are other types of Detached Accessory Structures: Guest Suites or Home Studios, for example and though they look and feel like ADUs, they are easier and faster to build and permit. The key difference is they can only have one sink. So let’s keep this discussion to simply ADUs.

What are the rules?

A detached ADU cannot exceed 20 feet in height. Coverage of the ADU can’t exceed that of the primary residence. The ADU is not permitted to occupy more than 15% of the site’s total area. The unit must either be set back 40 feet from the front of the lot line or behind the rear wall of the main residence.

In Portland, an Accessory Dwelling Unit is defined, technically, as “any smaller, secondary dwelling unit which can be legally added either on the same lot or within a house, attached house or manufactured home in residential zones”. Legally, an ADU is part of the same property as the main home. It’s not (typically) bought or sold separately.

Permitting and What To Expect, Depending On Use:

For long term rentals, Portland currently has a program that waives the extensive building permits associated with building some ADUs. Portland has some clauses that help with building ADUs for long-term rentals as well.

That said, as far as Short Term rentals (STRs), most homeowners go the Airbnb route. Portland is among the stricter cities when it comes to short-term Airbnb rules and regulations.

But for all ADU structures, you’ll need to get a permit from Portland’s Central Planning Bureau, which can honestly be a bit of a pain. You’ll also need to get the permit approved by Portland City Council and then you’ll usually need approval from the Zoning Administrator as well. The process can take days or months, depending on how busy they are.

Most proper1es in Portland are able to accommodate an ADU. Please note that there are requirements for open space – you’ll need to leave an area that is 250 sqH and 12’ x 12’ minimum and you can’t have it in the front yard. Tree protec1on and setbacks also influence where your ADU can be placed. Additionally your ADU must be at least 40’ behind the front property line or behind the rear wall of the exis1ng house. So, best to get some help. But who? Finding the intersection of affordability with quality and sustainability is key in hiring your project partners. Who to start a conversation with for Design/Build? Or maybe look into prefab units like those offered by Cover?

Design & Build? Or maybe just fix up/convert? Consider a consultation with The Portland area best:

Mark Allen with Peg Construction
SQFT Studios
Living Room Realty FIXERS – Maybe your space is ready to go outside of some repairs/renovations – maybe just need to add an egress or little kitchen area? LRR Fixer crew are masters.

What style? Here’s some of the usual suspects:

Apartment over garage
Garage conversion
Back yard cottage
Granny flats
Mother in law quarters
Prefab detached unit

Investment: Ballpark costs to build

For a detached Portland ADU new build, all in with permits and build is roughly $150 a square foot (builders general cost), or assuming about 200-250k minimum from scratch; 150K for a minimum viable type deal for a smaller budget.

Figure out financing – there are tons of options, and Portland’s got some of the sharpest loan professionals around who specialize in ADU and can customize your loan options accordingly. Check out the ones we love the most, and their favorite products:

James Adair, Neo Loans
Craft3 Loans Craft3 is enthusiastic about the many benefits of ADUs. They offer hard-to-find financing, with two affordable and convenient ADU loans, providing options for investing in your property and your community. Both loans are available in Multnomah, Washington, and Clackamas Counties, Oregon.
Your existing resource – credit union, lender you’re working with, or just simply have a conversation with me – I’m no lender, but I specialize in connecting the right people to find the perfect match in products and expertise.

Return: Estimating the ROI on your proposed ADU project. How much money can this generate monthly?

ADUs are an ideal source of passive income, and they keep getting more lucrative. A detached ADU adds the most value to your property; next in value is an ADU attached to the main house.

An ADU converted from existing space within the primary house, like a master bedroom suite, attic, or basement, adds the least value to your property, but it still adds value.

Let’s look at how an ADU can generate passive income, save you money, increase your personal options, and maximize your property’s value both now and in the future.

To get a sense of the income an ADU in your area could generate, research local rents on rentcafe, craigslist, AirBNB, or vrbo. ADUs offer more privacy than apartments, and many have their own outdoor areas, which makes them more appealing to a lot of tenants.

And finally, ask yourself – do you need professional property management services or go it on your own?

Maybe just a conversation with someone who’s doing this now? It’s exciting to hear both the ups and downs. Or maybe you’re thinking you might want to sell your current place or rent it out? Find an ADU of your own? I’d love to talk to you about all aspects of this, so give me a call, I’ve got experience on all sides of this fascinating, very sweet way of living now, being creative and practical. Looking forward to hearing from you!

Tag: building permits

Why Buyers and Sellers Should Care About Unpermitted Work