Beware of Code Violations on the Home You’re Buying

Did you know that as a homebuyer you may be a liable for a code violation on the property you’re attempting to purchase? 

Per an article in Chicago Tribune, code violations can often derail a home sale. 

So what are code violations? These are violations and fines recorded by a city or county’s code enforcement section against the property. The most common violations are unpaid property taxes and homeowner association (HOA) fees. In 16 states and the District of Columbia, HOAs can issue liens against the property which take precedence over any other liens – called a super lien. 

Additionally, violations can include issues with minimum building construction standards, accumulated trash, improper care of swimming pools, overgrown yards and landscaping, or even, noise complaints about barking dogs. 

Most violations occur when the previous homeowners were involved in some kind of duress, such as bankruptcy and foreclosure. However, violations can occur at any time. Once a fine has been issued, if it goes unpaid, it can grow into a five- or six-figure penalty over time.

In many cases, the real estate agent or the bank may not know about the violation until the property is in the escrow period. If a lien is recorded, then the title company should find it during the title search. Unfortunately, sometimes this happens a few days before escrow closing.  

At that point, either the home seller or the homebuyer will have to pay the fine and get any violations fixed. However, if the property was a foreclosure, it’s sometimes not that simple. Ideally, in these cases, it should be the bank’s responsibility to take care of the issues and pay the fine. But that doesn’t always happen. Then since the lien is against the property, it becomes the responsibility of the buyer. If the buyer accepts responsibility, he/she pays the fine and gets the violations fixed. If the buyer won’t accept the responsibility, then the sale falls through. 

So how can you determine if the property you’re buying has any code violations? First, be sure to read the preliminary title report carefully to see if there are any liens or violations against the property. Second, you can obtain a code property inspection, which is different than a home inspection. A home inspection reports on the condition of the home, while a code property inspection looks for building code violations and liens due to violations. Also, be aware that code violations tend to be a bigger issue in real estate markets that have high foreclosure rates and negative equity. 

If you are buying a new home, contact a professional mortgage broker to help you secure a mortgage loan that’s right for your needs.