Selling a House With Code Violations? Review Your Options

What are code violations?

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, so 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.”

Does your home have any of these common code violations?

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.

Other areas where code violations can be discovered:

• Messy or overloaded electrical panel – If the electrical load exceeds the load rating, breakers will trip … or worse, a fire could start. However, Barker says that electrical panels aren’t a code issue and that determining if they’re overloaded is a complex proposition.
• 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.
• Use of polybutylene piping – An inexpensive, flexible, freeze-resistant plastic tubing used for plumbing from 1978 to 1995 that can break and leak over time, causing water damage. 
• Missing expansion tank for water heater – A water vessel placed inline in a closed hot water plumbing system to help protect against leaks caused by excessive pressure due to the natural expansion of water as it’s heated.
• Windows not up to local housing standards – Glazing must be free of holes and cracks, with no missing portions and must be supported by frames that provide secure and sealed connections to the wall. Glazing, sashes and frames shall connect securely to limit the infiltration of water, moisture and air in accordance with the HUD requirements. Windows along stairways and landings or that have nine cumulative square feet must be made of safety glass.
• Renovations made without permits – Some renovations do not require permits, but if they do and you don’t have one, you’re liable to pay a fine and may be required to demolish the renovation if it can’t be brought up to code. It can even void your homeowners insurance. 
• Remodels that don’t meet current standards – Rules regarding shower door openings, sink spacing, shower size, ventilation, and more are governed by standards and codes. Keep in mind that items only have to meet the code that was in effect when they were built or installed. “What was code when the house was built?,” Barker queries. “Those things don’t need to meet current code.” They are “grandfathered in.”
• Rooms added after original construction – Work must be permitted and meet building code. This issue often arises, Davis notes, especially with flippers. “One of the big things is building permits for bathrooms, additions, and finished basements.”
• Egress window in basement bedrooms – To be labeled as a bedroom, a basement room must have an egress window at least 24 inches tall by 20 inches wide.
• Roof pitches – If the pitch isn’t steep enough, it shouldn’t have shingles. According to Davis, this has been a recent code violation getting attention. Roofs with less slope should be covered by rubber, metal, or Thermoplastic Polyolefin (TPO) roofing.

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:

• Significantly deficient
• Not functioning properly
• Unsafe
• At the end of their service life

As you can see, code violations can come in many shapes and sizes, and 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.

Does the homeowner need to fix code violations in order to sell?

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.

Do sellers need to disclose code violations to buyers?

Most states require sellers to disclose any known defects of a house in writing. Some states have standard 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.

Can code violations reduce your buyer pool?

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.

Three options to consider when selling a house with code violations

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.

1. Fix the code violations

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:

• Move a mounted smoke alarm to comply with regulations – Free if DIY, or hire out for $70-$150
• Test for GFCIs in your outlets with a GFCI receptacle tester – $12-$40
• Replace outlets – $20 each
• Hire an electrician to replace an old outlet with a GFCI unit – $130-$300

These violations can cost more to correct but are generally still manageable:

• Install a new electrical panel to upgrade your home’s amp service – $800-$4,000
• Restoring a cracked foundation – Can start at $500 for minor cracks and run $15,000 or more if hydraulic piers are required
• Re-plumbing a house – $1,500-$15,000, depending on the piping material and size of the house

Some items are better replaced than repaired. For example, if Polybutylene piping is under a concrete slab, it will inevitably become damaged over time, so you’re better off replacing the piping altogether.

2. Offer the buyer a credit or lower the selling price

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.

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 2023, 41 percent of buyers who purchased new homes wanted to avoid renovations and problems with plumbing or electricity.

Some examples of the most common credits sellers might offer include:

• Roof
• Electrical issues
• Water heater

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.

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.

3. Sell your house as-is to a cash buyer

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 (multiple listing service) 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 24 hours. If you choose to accept it, you could close in as few as 10 days.

How to save the deal

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.

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.

Header Image Source: (FrankWinkler/ Pixabay)