>> welcome to the department of building inspections brown bag lunch. had is part of the series on the third thursday of every month on topics of general interest. today we are going to talk about a subject that comes up a lot when people get permits which is am i going to be able to recoup the value of the work i do on my property? how does my improvement or repair affect my property value? we've guests. jonathan from vanguard. james from vanguard. >> thank you. >> alice an old friend and a

neighborhood for many years. thanks for coming. i have a big handout of stuff about what other people think values might be when you do work on your home. of course, san francisco is a different world. >> it is. >> in what way is it different? >> we have so many microdistricts and pockets of different values all within tiles two or three blocks. so, answering the question for one house may not always be the same as answering the same question for a different house, for example. >> give us an idea. if you put a deck on where you get a view you get a different view than when you put one on when you don't have have a view. >> or a simple kitchen remodel versus a fancy kitchen remodel on a house that might be worth more than a condominium on the same block even. those things can matter quite a bit and make a difference. >> we got a request from one of

our viewers to make sure we talk about what home improvements result in revised building taxes. accessible taxes. >> the other thing that might be brought out are people that overimprove. that there is a fine line and it is always -- i recommend that my clients particularly or anyone talk to realtors before they start home improvements and it is is a good idea to get an idea of specifically that neighborhood, that house and how it can be done. >> page 22 of the handout, spend an hour with a pro or a real estate person or somebody elements and talk about what the value means and hugh it will add value to your home or if it will be overspending on something that maybe you could do without value to your home or if it will be overspending on something that maybe you could do without

value to your home or if it will be overspending on something that maybe you could do without value to your home or if it will be overspending on something that maybe you could do without value to your home or if it will be overspending on something that maybe you could do without value to your home or if it will be overspending on something that maybe you could do without. >> it is important to know why you do it. are you doing it to add value or are you going to live there 20 years. if it costs $20,000 but adds $15,000 and you are going to live there it is different. >> i will give an example. i had a lady who bought a couple of units and it was an old victorian with a brick foundation and she was absolutely convinced that that foundation had to be concrete and had to be concrete tomorrow morning. so, she did that and she had all of these different people look at the different ways she could do it and someone convinced her she should really beef it up and do it to the degree she could add another living space down the line if she chose. this is 10 years later and against my advice she probably spent $100,000 plus on pouring all kinds of concrete and to this day it sits there as an

empty shell of a basement that is sort of useless. so i think often you can get expert opinions from many different people and the value question is a different question than an expert opinion on a particular subject. the value question is a question of just that, the value of the property and is it over improving. sometimes the contractor will tell you otherwise when the value is a question for probably a salesperson. >> i think that was something john brought out. what value. is it value to you? is it value to the appraiser that comes in a month's time when you sell it. so value is certainly individual. and we do see houses, unfortunately, as james was saying, that maybe they do beef up the foundation but on the other hand there are so many that just do the fluff, you know, and don't do anything behind the walls, which is also an issue for us that when we go

in there. but people buy in. but we have to really make sure that the homeowner is aware of both. >> something else that is typical misnomer is, well,, that remodeling my house, doing what renovations before i would sell it might increase its value. not necessarily always, and not necessarily in all instances. one thing -- there is different levels of that, and that is why i think it is so important to get professional canyon about your true goals, see if your goals for doing a major improvement or even a minor improvement on your property, it those gold mine up with the market situation and how best to reach those goals. maybe there is ways to reach those goals for you on a personal way that may not involve a heavier remodel. >> let me mention a couple of

things that have come up. i see people coming in to replace brick foundations and do other work that they believe is necessary without actually having consulted. in some cases, they do things they think should be done that are actually not, whether money could be much better spent. if they improve the structural quality, they would have a much steeper improvement curve if they put it in the ground floor in the garage area. >> in the course of what i do every day, i see a lot of people who have undertaken various kinds of remodels without benefit of proper permitting, and one of the key question that is always asked i like to have your opinions about, which is what is the relative benefit to doing work to one's home prior to sale with permit compared to without permit? and is it a good step to take to

seek to legalize things that were down in the past that might have been done without permits? >> -- essentially what i'm asking is what percentage of the value added do you get from your kitchen remodel? >> are you saying that this is already built, or they are ones you are interested in building and want to know whether they should do a permit or without? >> [inaudible] usually, it is whether they are going to go back and permit something that was done illegally. >> that is really tricky. i think it has a lot to do with the expectation of the amount of money they will get for the property. it is just you have to -- you really have to disclose, disclose, disclose in that case. it has happened to me before, and is mainly because you cannot see what is behind the wall.

the buyers are certainly, and they should be, concerned about what the electrical looks like, where the plumbing is, what is happening to something that has not been permitted. it could be just fine. a lot of owners will tell you that they had their uncle joe do it, and he is a plumber, and he is an electrician, but they did not want to spend the time and money to do the permit process. that's fine, but it is really hard to convince the buyer. it is going to have an effect on the value, there is no question. if they want to go through the process, great. i have had sellers and require them to go through for a second bathroom that was not permitted, but everything was done properly with the contractor that owned the house, he went back and got it permitted, and it was not that big a deal. everything was done properly. i think they should find out what the process will take, and absolutely, if they are doing new work, definitely.

people are looking at them, and they scrutinize them, and that completion is now on their, it concerns them. >> the three r's is a report that basically summarizes what is in the building. it is a required document that disclosed from a seller to a buyer. >> it is a big topic because everyone knows that there are -- we used to say 60,000. i am not know any more, but 60,000 illegal or unauthorized units in san francisco that exist and people live on in them, so what does that all mean? >> -- it means probably, they will be built without a permit or the use of them, certainly in an permitted use. it does not necessarily mean that work done to add a room

down in a basement behind it derived -- a garage was done without a permit, but the finished space might be a non- authorized use, non-permitted use, so there are subtleties. you could have a room downstairs. you could even have a sink in the room as a family room with a wet bar kind of thing, maybe, but the city starts getting funny about that kind of thing already. it sounds like an illegal unit already. but it is not always a bad thing. i would not say that in many instances, legalizing -- the term "legal" is a very strong term. i think in our business, in the sales business, we try to avoid that term because it has many implications. to say something is legal or illegal, it has all the occasions in the world, and nine times out of 10, we cannot say. we can say is permitted or not permitted and authorized or not

authorized, so those other little subtleties that we have to be mindful of as well. one thing i wanted to say, back to jeremy's question, was there are quite a few very good people in san francisco to go to if you want to legalize something that has been done without a permit in the past for a remodel that was down or a bathroom that was added downstairs without a permit. you feel like your uncle may have done it properly, you have to go back and get a permit. oftentimes no big deal, and it is a good thing to do, and there are many companies that specialize in doing just that, so you can do that. it depends once again on your goal. if your goal is to sell the property or to avoid neighbor complaints, so there could be two different polls there with two different choices about how you go about taking care of the bathroom that you build are in the basement without a permit, or you may do nothing.

that might be ok, too. >> the question was related to value. >> the hypothetical of the kitchen remodel, high and remodel that was done without the benefit of permit -- what percentage of value are they leaving on the table by selling that without benefit of a permit? >> i think in my experience, eight times out of hand in the residential context, buyers are not -- it being done without a permit, you can convince them that it is ok. when there is multiple units involved or is an illegal in law that people want to rent out, then you are dealing with more value issues. but for instance, in a kitchen

or bath remodel, in my experience, buyers are not scared by that. >> i should mention that from the city's point of view, when you buy the building, you are buying the problem. you are buying that unit without permits or buying a kitchen remodel without permits, so hopefully, it was disclosed at the time of sale. >> one example i have of a property i sold about four years ago, it was a $3 million property, and they had never gotten their completion notice. the other thing i would say, it depends on the marketplace itself. at that moment in time, we got a buyer. they took it without a completion. we disclosed as to why there was not. it had to do with the fire escape. the buyers took it on, and we were very clear, and when it was

going to be sold again two years later, i got a call from the agent who was the buyer's agent to ask me about a property i had sold previously. so we are involved forever in some cases. the other thing -- they bought it than. today, it would be a different story, i think. the other thing about the illegal rooms down, i would say that it is obvious to the appraiser, the appraisal is a big thing for us now, obviously, for value. the appraiser, if it looks legal, he might count it as a room, otherwise, he might not count it within a square footage, and that could affect value. if it looks legal, he might not go and check it, but if it has no ceiling, no window, and someone is calling it a room, there is going to be a question of value. >> another big issues for questions of value with regard to is there a permit or not done

for certain work on property has to do with the future potential and sometimes intense kind of convertibility, and that is a big one. -- condo convertibility. i just went through this recently on a two-unit building where there was a deck that was built without permits to be used as a recreational deck, but on the building plans itself that were approved by the city by the department building inspection, there were the decks shown. it said the word "dec." it said the word of it -- there was railing on the plan, and there was a full staircase to get up to this deck, but there was no -- we had a problem because building inspection that was done for the sale of the property by the buyer indicated that it could not be a permitted

roof deck because there is no second means of egress from this debt -- deck. digging around a little bit more, we found that to be true. this was a two-unit building at the buyer intend to go through and apply for a condominium conversion at some point in the next year or two so that was a big deal for them because they found out that they had to add a second means of egress. that was a $10,000 problem. >> i think i need to chip in here and say that codes have recently changed about second means of egress. just so you know, only one exit is required for each unit, but this predated that. >> going back to the unit's downstairs, my friend has one and rented out, but the neighbor complained about it too many

people, so, i mean, what kind of problem could my friend get in this kind of situation? >> i think that is more for lawrence. >> there are endless problems we can get into. you are an attorney, do you want to talk about the endless problems or just leave it open? >> i think i will leave it open. >> there are problems related to the city and the city's enforcement planning, planning enforcement, problems related to the tenant who has rights with the side warranty of have an ability and all the other things, the problems about meant, and is the landlord committed to collect rent for an illegal unit? the and control is an endless series of problems. -- the rent control. >> [inaudible] >> that is an excellent point. we will talk about value, but let me just say that because it has existed for a long time,

that does not make it ok. it just means that they have got away with it for a long time, but that does not mean it is ok, unfortunately. >> that means the inspector could come in and kick out the tents out of the room downstairs? >> we do not inspect those on a routine basis. we only look at them if we receive a complaint, and then, we do not kick the people out. we tell the property owner, "you have this problem. we have to figure out how to solve this problem. maybe you could legalize the unit or make some other change. >> that means anybody could complain and make trouble for my friend. >> when we go to sell the property like that, if your friend wanted to sell her single-family house, she had a tenant in the illegal unit, if we write out a statement that we hand out to all the people that come in -- this has happened a couple of times that we put

illegality of unit unknown by owner and agent, or illegal was also the term that we used to use, and the neighbors see that. some of them could be angry and call the building department at the time of sale. they can call them for any reason and do it, but we have seen that happen, and the city had a problem, too, and they could make it illegal, and the owner also has to deal with rent control board because it is difficult to get a tenant out on that basis. it is very tricky and also more difficult to sell the property with a tenant in the eye and a non-permitted usage. the value is -- >> [inaudible]

especially in the sunset area, a single house -- >> it is a big issue. it is a policy issue. we have up to tens of thousands of these units. they serve an important function. they provide housing. the board provides moderate- income housing. very few of them never been meet the minimum standards for have the ability. they don't. i have been in hundreds of these units. i don't think i have ever in my experience been in a unit that was built without permits that neat -- meets the requirements of the building code, not once. what we have is a double standard of have the ability here. people who meet the code is live on the standards we have agreed upon. people live in units that are not permitted have some lower standard of have the ability. >> it is. i think it is.

the tenants pay their own rent, too. >> thank you. i wanted to add my two cents. i have legalized dozens of dwelling units, illegal units, for people in san francisco. in the last 10 years, there has been a sea change within the bureaucracy, the building and planning departments, where the attitude has been very proactive in trying to help property owners bring things up to code and to save these old, illegal units, rather than force them to be abandoned. the attitude of the city has really changed a lot and people are more likely to get help from their building inspector rather than enforcement. >> what i had hoped we could do is look at this little hand out for further discussion. starting on page one, it is from a website, home remodeling magazine, there is a long list of things supposedly san

francisco-based, adjusted for local conditions, and how much of the cost you can expect to recoup for the work you're doing in the building. if you're doing work because you want to live there and you want to appreciate the improvement, that is different. if you're doing work with a clear eye to how much you can get back, i am shocked to see under the column that says "cost recouped," there's not a single one of these things that says you can get back all of your cost, not one. some of them you get back a lot. most of them you do not do too well. is there anything where you recoup your full cost? golden gate bridge. >> there you go. >> in terms of immediate value, part of this is a function of our limited housing supply, really. that affects the value, of course. if you do a bathroom remodels,

they are saying the job cost $18,000, you might recoup $15,000. the hard part in determining that, to compare apples and apples, is to look at a house in the sunset district with a single-family home with one bath, or is it a 3-bedroom condominium in the castro where maybe everything else is really done fairly recently and updated nicely, but maybe the bathrooms never got updated? that would probably change dramatically the resale they'll -- value on that universes' the house in sunset. these are wild figures. we have to go to seek professional advice with the intent of satisfying your goal, whatever your goal would be. this is a question when representing sellers that we get all the time. it should i do this or that? you really need somebody that is in the industry to come with you

and go through and say, don't do that, but painting this would be great, but don't put in a new counter in the bathroom or kitchen. it is item by item, neighborhood by neighborhood. sometimes, sellers are under the impression that if they agreed to the kitchen, that will add more value than they spent. oftentimes, it is the case that the buyer will not want what you as a seller chooses. in fact, it is a detriment. sometimes it will turn buyers away. it is already begun. i don't want to tear it out. i don't want to pay for someone else's remodel. a lot of times, money well spent is an old adage, but things -- just selling a house, paint is the best thing you can do. >> pete is the number one thing.

it really is. >> i sold my own house a few years ago when the interesting thing was that of a beloved my house. ever the love that. i said, it it is not exactly in of -- everybody loved it. i said, it is not exactly universal. we had a 50's kitchen. we had a second garage. we put in storage. we always wanted to redo the kitchen. that was the main thing. people say, i love the kitchen. we sold that without redoing the kitchen. we made more money than we thought we ever could. they loved the kitchen. we separated the appliances and painted the whole thing. we did all the things around it. we made sure there was storage, and parking. all of the things that that was one thing that was not on, for somebody who would like to have it your personal, the kitchen,

particularly, do it -- do everything else. that was a very big lesson in some ways. i thought the value would be taken away for that. it was not. >> that is a good point. you are right. especially if you -- did you do a countertop change at all? you didn't. you did appliances. >> yellow. >> new appliances can help a lot. especially today, the cost of competitive prices are pretty good and you can make those changes for $3,000, $4,000, $5,000. they're oftentimes more energy- efficient. the general consensus is people like that. one other thing that i think is overlooked in terms of value, and i don't know of the survey talks about it, is landscaping and plants. lance camping, plants, and trees are really inexpensive compared

to major remodels. i often feel it is something that is heavily overlooked. it as a lot of value. it is a touchy-really, emotional part of a property. oftentimes, we don't have front yards. maybe there should be a tree out front. maybe you should have potted plants lining the stairs going up. perhaps the rearguard in, although you never use it, doesn't matter if you don't get sunshine. plant flowers that do not need son. those are oftentimes good ways to spend money on adding value to your home. >> people that are selling their homes do need to have someone that will absolutely come in. i had a stager come in my house. you need to have another i that will absolutely have you get rid of the little things that you think make it look homey and people love it, but the value --

there is a very big value here. it is the same thing as the fluff, but it isn't fluff. paint, or anything else. >> let's talk about staging and what that does. i see a trend toward more staging. what is staging and how important is it? >> staging is when, in the new property or a vacant property, we bring in furniture. it can also be the property you have that is your home, removing your furniture and bringing in someone else's. the goal of staging is to create a neutral, audience-neutral environment where the buyer can imagine themselves without detracting by having your personal photographs on the walls or your grandmother's throw on the couch. you will notice that it is often neutral tones