The Risk of Unpermitted Work in a San Francisco Listing: A Cautionary Tale

Apr 21

This rarely happens, but there was a house my clients bid on recently that they did not win. And I was sort of glad they didn’t.

I’m a pretty risk-averse agent (and person, generally speaking). In the disclosures for this property, the seller who owned this house for nearly 30 years basically had ZERO notes on the property condition or history. To me, this is usually a red flag. The 3R report indicated many opened permits during his ownership, but none of them were ever "closed", including a horizontal and vertical expansion. It also had verbiage TWICE on the 3R permits about this being a three and then two unit property. Not great.

What we found:

I did my normal deep dive on the San Francisco Department of Building Inspector's website, in addition to looking through the San Francisco Planning Department’s website on this property’s history for this building’s history and use. I also called the DBI office to verify information we saw on the website regarding the 1990s permit about those expansions a few days before offers were due (we thought there had been potential inspections at least for things like “welding”, “bolts in concrete” and more). I was eventually routed to a senior inspector for help and left a voicemail. The client's GC had mentioned the support beams throughout the home being a potential red flag to him since they looked to have been created on site and never inspected. When you have hardly any interior walls for structural support, you really want the welding to be done properly.

The inspector called back 45 minutes before our offer was due and gave us some rough news - things we thought were potentially inspected were NOT, and he said any permits pulled in the future would trigger inspections for these expired permits. He said they would probably also want to look in the walls at the electrical upgrades in addition to the obvious structural supports. This meant a potentially MUCH larger project at this property to correct anything not done to code in the recent years. This call absolutely changed our mind about the valuation of this house.

Another Risk:

I mentioned that there were notes in the 3R Report about this property being a two and three unit property. These were two separate permits - one “completed” by a previous owner, the other “expired” by the current owner. The city seems really focused on recapturing units like this since there is pressure coming down from the state to add housing. Did you see that story about a family that bought a 4 unit building a few years ago and now the city is making them restore it back into multiple units (it had been turned into a single family home before they bought it)? Yikes.

In addition to this, I’ve heard of multiple situations recently where neighbors go into a property during open houses and they contact the city if it’s apparent the house is a multi-family building being used as a single family home.

I don't know who ended up buying this house, but I hope they don't get into trouble down the line. Due to our crazy spring market, it ended up going a couple hundred thousand dollars over where I thought it would - a nearby comp that was very similar AND had been done with permits sold for way less just a month or so prior.