With Terry Story, a 30-year veteran with Keller Williams located in Boca Raton, FL
Steve spoke with Terry Story, a 30-year veteran at Keller Williams. During this week’s Real Estate Roundup, Terry and Steve talked about permits that homeowners have, what open and expired permits are, and why they can cause problems for homeowners looking to sell their home and for realtors assisting them.
Open Permits Can Sneak Up On Homeowners
When homeowners go to sell their homes, multiple searches are run on the home to see if money is still owed. This includes a tax lien, a city search, and a search for permits. There could be permits on just about anything. The guy putting in the air conditioning may have opened a permit. The same could be true for the guy installing electricity. There are could be five or 10 permits open that the homeowner and their realtor is unaware of.
There is a fee simply to run the permits. This can become a major headache. In order to close any open permits, the realtor must jump through an incredible number of hoops. They literally have to chase down the individuals or companies who opened the permits, which may have been sitting around for years, even decades.
The permit may have expired. It is then the homeowner’s/realtor’s responsibility to find the party who originally opened the permit. The permit must be reopened so that the fees and the permit can be paid off and closed permanently. So, basically, you’re talking a lot of extra work and extra expense for someone trying to sell their home.
The Letter Of The Law
Recent legislative victories, fortunately, have changed the scope and hassle of permits. Starting October 1, 2019, local governments will be allowed to close out permits six years after they’re issued, as long as there aren’t any clear safety issues. For example, say there was a permit to repair a sinkhole, but repairs weren’t completed. The government would not be able to close out the permit without making sure that the sinkhole is dealt with or that it doesn’t pose a threat.
The true difficulty with permits—and why the new legislation is so helpful—is that just about everything, any kind of repair or maintenance work in a home, needs a permit. It can be incredibly difficult to keep track of all the permits attached to a home and to know if they are open, closed, or expired.
The permit problem can be a real obstacle because permits are the kind of thing that doesn’t get checked until you’re maybe a week or 10 days from closing. You may have to do some really fast work to get things squared away in time for the closing. Permits are such a problem that there are businesses that specialize in clearing them for you—for a fee, of course.
Changing gears slightly here, let’s talk a little bit about deposits and fees. There seems to be confusion among individuals about putting down a deposit, specifically a non-refundable deposit. This is basically money that you put down, usually to help the owner of the property protect against damages.
For example, if you’re renting and have a pet, the property owner may ask for a non-refundable deposit to protect himself against any damage the pet may do to the property. Once you leave, the owner can use that money to pay for repairs if necessary.
There is a difference between a refundable deposit and a fee, but there’s really no difference between a fee and a non-refundable deposit. The term “non-refundable deposit” is kind of an oxymoron. If it’s non-refundable, then it’s effectively a fee.
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Steve Pomeranz: It’s time for Real Estate Roundup. This is the time every single week we get together with noted real estate agent, Terry Story. Terry is a 30-year veteran with Keller Williams located in Boca Raton, Florida. Welcome back to the show, Terry.
Terry Story: Thanks for having me, Steve.
Steve Pomeranz: I noticed some information on Florida realtor’s biggest legislative victories. Wow, that sounds really impressive, doesn’t it? One of the remedies has to do with open and expired permits. When I said that, you practically jumped out of your seat.
Terry Story: That’s a double yay.
Steve Pomeranz: What’s making you so mad about permits?
Terry Story: Okay, so, here’s the deal. The word open is a four-letter word. As realtors, this kills us. First of all, to understand what this all means, when you go to sell your home, they run a tax lien, a city search, open permit search. They un-discover these permits that have been sitting around since… I’ve got three of them this week from like 2004, 2005, 2008 on different properties.
Steve Pomeranz: People open a permit, but they never close it
Terry Story: Correct. Your air conditioner guy opens a permit, the hot water or heater guy, the electric guy. See, there’s all these permits that are laying around open that you don’t know about. Here’s the thing, you don’t learn about this until two weeks before closing when the title company runs their search. They don’t want to run the search right in the beginning when you say you have a deal, because, A, it costs money.
There’s a fee involved to just run the permits. Now, you find out, a week before closing, you have an open permit. This is a monumental task to get closed. You have to, if the contractor still is in business, most of them are not, that’s-
Steve Pomeranz: That’s a very good point.
Terry Story: You’re hunting down somebody from 2005. Especially with roofs… We had a hurricane back 2005, Wilma, and they almost gave us carte blanche, just get whatever repairs you had to do. So, there was no permits going on. That wouldn’t really be a problem. The problem here is when somebody opened a permit but never closed it.
Now, the homeowner has to run to the city, reopen a permit that’s expired because it’s now an expired open permit, pay fees-
Steve Pomeranz: To catch it up.
Terry Story: Well, right.
Steve Pomeranz: Catch up.
Terry Story: They’ll charge an open fee. I just had one done for $220. Then, you have to get the city back out there to inspect it. Now, they’re inspecting a roof from 2005. Do you think whatever was wrong 2005 they’re even going to even be able to pick up on? It’s almost time for a new roof.
Steve Pomeranz: It’s a joke, yeah.
Terry Story: It really delays our closings. If somebody is insistent on it being closed out… I just had this today, as a matter of fact, the buyer insisted that it be closed out, they wouldn’t close. Well, guess what? This was a three-way domino. If this first one didn’t close, the second wasn’t going to close, the third one, and a fourth one, over… I forget what it was, a silly permit. The seller spent triple fees, and then hired a closeout fast permit guy.
Steve Pomeranz: Specialist.
Terry Story: Specialist. That there’s now-
Steve Pomeranz: There is such a thing?
Terry Story: Correct. They get paid a lot of money to deal with this.
Steve Pomeranz: Wow, I want to do that. Listen, anybody out there is looking for a job, that sounds like a great job.
Terry Story: That’s a good business. It really is. This is really good news. I don’t know exactly all the details. It takes effect October 1, 2019. I mean, basically, what it’s saying it’s going to allow local governments to close a permit six years after its issuance, as long as there’s no apparent safety hazard issues.
Steve Pomeranz: They come out, they say, “You didn’t repair a sinkhole, and the ground is bowing again,” or something, so no safety issues, obviously. So, they’ll just close it out.
Terry Story: Most of these are just silly open permits that are just hanging around.
Steve Pomeranz: Okay, so, the thing is I think there’s some confusion, I know there was on my part, about what you need to get permits for.
Terry Story: Oh, boy.
Steve Pomeranz: Because there’s actually an article where this woman said, “I wasn’t able to close on my house, because I didn’t have a permit. I disclosed later that I had replaced the toilet.” I’m thinking, why do you need a permit to replace a toilet? It’s inside the house. You were saying that faucets-
Terry Story: Yeah. I mean, technically, almost everything in your house needs a permit, if you’re going to go by the letter of the law. That brings up another subject that goes to seller’s disclosures. On the seller’s disclosure, there’s a question, did you do any work without a permit? Or, did any previous owners do any work without a permit? I would tell you, I would say, obviously, you can’t be responsible for what other people did, so I would answer that as, “I don’t know.” Now, I would even say, “I don’t know,” as an owner almost because you may not realize that that faucet that you change out 10 years ago, oh, by the way, it’s now… You, maybe, changed the third faucet out with a permit but not the first faucet out with a permit.
Steve Pomeranz: Oh, God. Come on.
Terry Story: I mean, where do you draw the line to this?
Steve Pomeranz: Well, first of all, it’s insane that, if I replace a faucet, that I need to get a permit.
Terry Story: I’d get a plumber. I don’t know I’d want you to change it out, Steve.
Steve Pomeranz: Well, that’s true. That is true. Actually, if I was changing it out, it would definitely need a permit.
Terry Story: And a plumber.
Steve Pomeranz: And an inspection when I was done. No question. That’s the point. If you replace your water heater, which is something you can buy in any big box or other store.
Terry Story: Right. I wouldn’t install it yourself. You would need-
Steve Pomeranz: No, no, but you have-
Terry Story: … a plumber, but-
Steve Pomeranz: Yeah, but the plumber has to go and create and open a permit.
Terry Story: Technically. Yeah. Which, of course, then you can go without hot water for a while waiting for your permit to be issued.
Steve Pomeranz: Well, I think the big deal here is that a lot of people don’t know what requires a permit. You may answer on this form, is there anything outstanding? You go, “No,” because you honestly think so. Then, then find out later that that actually-
Terry Story: Is an issue.
Steve Pomeranz: … is an issue, and that can cause problems. I think the big lesson here is that, by the time they have to do a search for open permits, it’s very, very, late.
Terry Story: It’s at the end. It’s like a week, 10 days, before closing. That’s where we’re running into all these issues.
Steve Pomeranz: All right. I want to change topics here because there is some confusion as to what is a deposit that you’re being asked to put down, and what is a fee. When you see the words, nonrefundable deposit, let’s talk that word through a little bit, those two words. A deposit is something that you put down. Let’s say you have a pet, and the owner of the property wants to protect against any damage the pet does, so it asks you for a deposit. Then, once you leave, if there is damage, then they can use money from the deposit.
Terry Story: Right.
Steve Pomeranz: Okay, that’s one way a deposit is used. If the homeowner is saying to you, “I’m going to charge you an amount to have a dog, just for the habit of…”, that’s a fee. But, it’s not a nonrefundable deposit, because that’s an oxymoron.
Terry Story: It is an oxymoron. It is hysterical because we talk in refundable deposit terms and nonrefundable deposits. A nonrefundable deposit, no matter how you name it, is a fee. Who wants to say, “I’m going to charge you a fee for your pet.”?
Steve Pomeranz: That’s right.
Terry Story: Doesn’t sound right.
Steve Pomeranz: It’s a use of words that actually obscures intent.
Terry Story: Correct.
Steve Pomeranz: I’m not a lawyer, but I just sounded like one.
Terry Story: It sounded pretty good there.
Steve Pomeranz: Thank you, very much. The issue, the real issue though, is you should not accept the terminology nonrefundable deposit. You should say to the person, “That’s a fee, isn’t it?”.
Terry Story: That’s a fee, pet fee.
Steve Pomeranz: Okay.
Terry Story: Pay the fee.
Steve Pomeranz: Well, we’re out of time. My guest, as always, is Terry Story, a 30-year veteran with Keller Williams located in Boca Raton, Florida. She can be found at terrystory.com. Thanks, Terry.
Terry Story: Thanks for having me, Steve.