Whether you’re selling a mid-century ranch in an established neighborhood, a 1920s arts and crafts bungalow on a tree-lined avenue, or a brand new contemporary white box in a just-built subdivision, a home inspection may very well reveal code violations. This should not create a panic situation. While the news can be surprising and a little distressing, selling a house with code violations is possible. And the discovery of code violations is more common than you might think.
DIY home repairs and renovations will almost surely have code violations. “They happen all the time,” says Jared Davis, a top real estate agent who works with 80% more single-family homes than the average agent in Richmond, Virginia. He speaks from experience as both an agent and a house flipper. Even work performed by contractors is subject to code violations. The most frequent issue he sees is a lack of permits. “One flipper bought a house where the previous owner didn’t get permits for the third bathroom.” It came to light during the home inspection. “The contract fell through,” Davis reports. If you’re facing a code violation, this post can help calm your nerves. We added some expert advice from Davis and Bruce Barker, president of the American Society of Home Inspectors Inc., to our research on selling a house with code violations. This guide will help you determine your selling strategy in light of this discovery. Most cities and municipalities adopt a set of universal building codes for residential construction that are developed and updated by the International Code Council (ICC), collectively referred to as the International Residential Code (IRC). Municipalities can then add more specific building codes, primarily for safety and public health. National codes, such as the National Electric Code (NEC), oversee electrical design, installation, and inspection. In addition, individual Homeowners Associations (HOAs) can set codes intended to protect property values. Any of these codes can change, particularly as technology evolves, making it difficult for the average homeowner to keep pace. For example, the NEC is updated every three years. Therefore, what was considered safe and up to code a few years ago, may no longer be so. “Codes change over time,” Barker reiterates. In addition to amendments and changes, he points out that each jurisdiction has their own set of codes. “For example, there are about two dozen jurisdictions in the Phoenix area. Each has a different set of codes.” Code violations indicate areas that don’t comply with requirements, resulting in violation notices – or orders of correction that explain the code and how to correct the substandard component in order to be in compliance. Building code violations range from simple things a homeowner can fix to major repairs that require a professional’s expertise. The Family Handyman, a home improvement publication founded in 1951, notes that the most common building code violations include: According to Inspection Certification Associates of Chicago, Illinois, a group that provides national online training and certification of home inspectors, a main breaker or service panel should be at least 100 amps. Additional electrical problems that a home inspection may uncover include inadequate amp circuits. For example, kitchen and utility areas typically require 20-amp circuits, while lights and other 120-volt household circuits use 15 amps. Other areas where code violations can be discovered: It’s important to point out that a home inspector’s job is not to find and report code violations. “Our job is to find and report defects,” Barker states. While there may be some overlap, he emphasizes that the ASHI standard specifies that inspectors look for items that are: As you can see, code violations can come in many shapes and sizes. Addressing them on your own can be overwhelming. For guidance on how to deal with your specific code violations, consult a qualified real estate agent. Partnering with an experienced agent who is knowledgeable about the local codes and requirements can take a lot of pressure off a seller. You can find a top agent by using HomeLight’s Agent Match tool, which provides details about the best agents in your area. Whether or not you must fix a code violation in order to sell your home depends on where you live and what the problem is. Many issues do not have to be fixed in order to sell your home, but some state or local authorities may require certain safety issues to be corrected before transfer of property. Check with city hall, the building department, or your real estate agent to find out what must be addressed. In addition, the buyer’s lending company may dictate if code violations must be fixed before purchase. For example, FHA loans typically won’t allow buyers to purchase properties with unpermitted converted garages or outdated electrical panels. This could become a negotiating point with the buyer. Similarly, because homeowners insurance for a home that’s not up to code may cost more, that too may become a point of leverage that allows the buyer to negotiate a reduced sales price on your home. Most states require sellers to disclose any known defects of a house in writing. Some states have standard disclosure forms. Check our list of all 50 states’ seller’s real estate disclosure forms. Even if your state doesn’t require disclosure, it’s a good idea to inform potential buyers of any issues you know about; doing so could protect you from a lawsuit later on. A title company will discover any liens or title defects, which must be resolved before closing, and a home inspector will note anything that’s a defect. According to both Barker and Davis, the home inspection is when most code violations are discovered. Because many buyers include a home inspection contingency, they can walk away from a sale after discovering major code violations. “Most buyers don’t want to deal with repairs,” Davis says. They may have to walk because code violations can make it difficult to impossible for them to obtain financing and insurance for the home. Some specific buyer roadblocks include: Encumbered title – If the home’s title is encumbered due to code violations, the seller can’t pass on a clear title to a buyer until the violations are fixed. A buyer will likely not be able to get title insurance until code violations are resolved. Unpaid fines or liens – Some code violations incur fines or liens, putting a sale on hold until they are resolved. The most common are unpaid taxes or HOA dues. Mortgage restrictions – Many lenders won’t issue a mortgage for a property with code violations – or liens. Even if the buyer can get insurance, it’s likely to cost them. The Insurance Information Institute (III) says that homeowners insurance protects against “common perils” such as fire, theft, water damage, windstorms, and vandalism. If your home isn’t up to code, it’s considered more susceptible to those perils, making insurance premiums higher. Not all buyers can afford or will agree to pay higher premiums. There are basically three ways you can deal with a code violation when you’re selling your home: fix it, offer money for someone else to fix it, or ignore it by selling your house “as is.” This option often depends on legal requirements, budgets, the scope of the problem, and the state of your local housing market. In a seller’s market, you will have more leverage regarding which, if any, violations you’re willing to correct. Violations like these are often affordable and easy to fix: These violations can cost more to correct but are generally still manageable: Some items are better replaced than repaired. For example, if Polybutylene piping is under a concrete slab, it’s probably too costly to repair. You may be better off replacing it, Louis Puglisi, owner of Servant Plumbing in Mount Pleasant, South Carolina, told Angie’s List. If the seller is unwilling or unable to bring a home up to code, offering a price reduction or a repair credit are options, particularly if the code violations don’t present a health or safety risk. According to the National Association of Realtors, 46% of sellers offered financial incentives to entice buyers in 2020. Because most buyers want a free and clear title, it’s almost imperative to reduce the price in order to attract a buyer willing to assume the responsibility of addressing any violations. Although some buyers may prefer to complete repairs to their standards, the NAR found that in 2020, 44 percent of buyers who purchased new homes wanted to avoid renovations and problems with plumbing or electricity. A repair credit is a dollar amount from the seller to the buyer to cover the cost of the repairs. Some examples of the most common credits sellers might offer include: Issuing repair credits can put the buyer’s mortgage at risk because the lender doesn’t know if the repair is warranted or will be performed by the buyer, so a safer way to issue a credit is to simply reduce the home’s price. Keep in mind that many loans only allow seller credits against closing costs, so technically, you cannot give a seller credit for repairs or things such as a carpet allowance, landscaping, or fencing. This could limit how much your “credit” can be. However, these days, Davis says, if the home is in good condition, many buyers are waiving the cost to repair some code violations. “They may waive $5,000,” he details, “or individual items under a certain dollar amount (single-line inspection items).” For these reasons, working with a top agent who knows the market and has experience with code violation scenarios can be of immense value. A proven agent will know the ins and outs of mortgage loans, closing costs, and repair credits – and will be able to advise a seller on what repairs really should be taken care of and which ones can be skipped. Your agent can advise if an “as is” sale is right for you. Although this type of sale typically doesn’t command top dollar, it has other advantages, such as speed and the possibility that you may not need to disclose property defects. Selling your home “as is” to an iBuyer (instant home buyer) before it hits the MLS may offer an attractive option if you don’t have the time or funds to bring it up to code. The pool of iBuyers includes institutional investors, national house flippers, and digital-age startups, all of whom purchase homes directly at scale. If you’re considering an “as is” sale, but want to get an idea of how much a cash buyer might offer, you can consult HomeLight’s Simple Sale platform. Simply answer a few questions about your home, its condition, and your selling timeline, and get a cash offer within 48 hours. If you choose to accept it, you could close in as few as 10 days. HomeLight’s Simple Sale platform can help you find a buyer without the added steps of prep work, repairs, and open houses. HomeLight’s network of investors will buy houses in almost any condition. Davis repeats the three basic ways to “save the deal” when selling a house with code violations: fix them, drop the price, or offer financial concessions at closing. In a buyer’s market when a buyer has many properties from which to choose, Laurie Finkelstein Reader, a top-selling agent in Plantation, Florida, counsels sellers to present their house in the best condition to beat the competition. This might include fixing some of the smaller violations. “So, let’s change the electrical panel. Let’s make sure the landscaping is perfect. Let’s make sure that the house shows like a model.” But in a seller’s market, she says, “We can move property with old electrical panels and unpermitted things … because buyers are lined up to buy the property.” An electrical or plumbing issue not up to code won’t stop someone from buying the house. So, don’t worry about them. There is always a way to save the deal. Code violations are so “impossibly complicated” that inspectors don’t even call them code violations, Barker says. But selling a house with code violations doesn’t have to be overly complicated. There are many ways to deal with them, whether you fix them or not. No home is perfect. Partner with an experienced real estate agent who can guide you on how to respond to a report of code violations.What are code violations?
Does your home have any of these common code violations?
Does the homeowner need to fix code violations in order to sell?
Do sellers need to disclose code violations to buyers?
Can code violations reduce your buyer pool?
Three options to consider when selling a house with code violations
1. Fix the code violations
2. Offer the buyer a credit or lower the selling price
3. Sell your house “as is” to a cash buyer
Additional tips and expert advice for sellers facing a code violation
How to save the deal
