Why Do I Need a Building Permit?

Spring is here and you’re thinking about doing some renovations on your home. Maybe you’re having a new roof put on, a new kitchen installed, or building a new deck. You’ve heard about building permits, but do you really need to apply for one? What are the implications if you don’t? And how much do they cost?

Permits are required to protect your health and safety, and the health and safety of the community where you live. Town staff review your improvement requests and ensure that all changes align with minimum safety and community standards (referred to as “Code”). Permits (building, electrical, plumbing, etc.) typically cost approximately $25 per $1000 of the estimated improvement cost, but it will vary from town to town.

If you’re not doing the improvements on your own, always hire a licensed contractor. They should pull the necessary permits for you. Ask them if they plan on pulling permits on your behalf for the job. Any reputable contractor will say “Yes.” If they don’t, request that they do pull a permit, or consider hiring someone else. Ask for copies of the permits before they start the work. Once they finish the job, the contractor should schedule a time for the town inspector to come through and verify that the work performed meets Code. Your permit will then be closed and the work has been legally and safely performed, per the town. A Certificate of Occupancy will be generated, if applicable. Always keep this documentation for your records. It will be valuable for legal purposes and if you later sell your home.

If you’re planning on doing the work on your own, call the town Permits and Licenses division in order to understand exactly what permits you need. They will guide you through the paperwork process. When you’re finished with the improvements, you’ll need to schedule a time for the town inspector to verify the work meets Code. Again, your permit will be closed if the work has been legally and safely performed and meets building code.

But what happens if permits are not pulled? If you choose not to pull permits and it is discovered by the town or a future buyer, you could have a costly situation on your hands. Work that has been done and paid for may not comply with Code. The work may need to be removed. Imagine ripping out your new bathroom because it didn’t meet plumbing code! Additionally, insurance coverage could be denied. You may be fined for not pulling a permit before the work was performed. Legal action could be initiated to ensure compliance.

So, in order to avoid a potentially costly situation down the line, always call the Permits and Licenses division in your town to understand what permits you need for your specific project.

Property Taxes

I am often asked how CT property taxes are calculated and how they may change. Here’s an explanation.

In the state of CT, real estate is taxed at the municipal level. There is no property tax levied by the state. Each town estimates expenses for the upcoming year and sets the local tax rate (called the Mill Rate) that is needed to support the budget. The town generates a list of all taxable properties that includes real estate and autos. This list, referred to as the Grand List, contains an estimated Assessment Value of all properties. Typically the Assessment Value is 70% of market value.

Most years, your property value and taxes will remain the same. Changes to Assessed Value typically only occur when you make improvements to your home, like upgrading your kitchen. However, each town must revalue properties every five years, either by physical observation or statistical analysis, or some combination of both. Physical inspections for reassessment purposes are required by CT law to take place every 10 years.

However, if your town changes the Mill Rate, your tax bill will also change.

Taxes on a property are calculated by dividing the Assessment Value by $1,000 and multipling by the Mill Rate. This gives you your estimated tax bill.

This year we heard a lot about taxes because several towns did reassessments and property assessment values jumped by 75%-200+%. Mill Rates also changed. With the changes came potentially huge tax increases for homeowners. Let’s look at a quick example.

I live in Hartford and my house’s previous assessments for 1999-2005 were based on a fair market value of $158,700. The Mill Rate fluctuated through the years and in 2005 my estimated tax bill was $4,776. But in 2006 the city did an external physical observation and statistical analysis to reassess all city properties and changed the Mill Rate once again. We received our letter from the Assessor’s office indicating that our new fair market value was $425,000. Our estimated property value increased 167%! So what would our new tax bill be?

Assessed Value        $425,000 x .70 = $297,500

2006 Mill Rate           42.30 for residential property

Estimated Tax Bill      $297,500 / $1,000 x 42.30 = $12,584

Our taxes nearly tripled! While the Mill Rate was lowered from the previous year, the huge change in Assessment Value outweighed the impact of the Mill Rate change.

So that’s how property taxes are calculated. Battling my tax bill will be another story for another day.

Mortgage Confusion

According to a survey recently administered by Bankrate.com, apparently 30% of US homeowners have no idea what type of mortgage they own. One of the biggest investments a person will ever make and they don’t understand the terms of the loan, or the implications of how their monthly payments will change as interest rates fluctuate.

It frustrates me to know that mortgage lenders and real estate professionals took advantage of individuals that didn’t know what questions to ask and were guided to products that weren’t necessarily in their long term interests. Of course, not all lenders and agents took advantage of inexperienced buyers, but those that did tarnish the image of all real estate industry professionals.

When buying a home, people should understand what they are buying and all of the costs involved. This includes transaction costs, potential resale value of a home and how value could be improved, long term cost considerations such as rising taxes, changing interest rates, etc. Consumers need to make informed decisions because a misinformed decision could potentially be financially devastating down the line. If you feel that your advisors in the home buying process aren’t fully answering your questions or straight forward in their responses, call them out on it. Just as you would do with a doctor, get a second opinion.

And here we go…

Welcome to the Neighborhood!

I’m going to use this space to share my thoughts about real estate in and around Hartford, CT. I would definitely like to interact with readers to see what folks have on their minds, so please post your thoughts and questions.

Rather than going through my background here, I’m going to send you over to my main site, AmyBergquist.com, where you can find more information about me and more importantly about buying and selling homes.

Finally, I’m going to try to post regularly, so check back often to see what’s new. Pages will also be added to the main site as I continue to develop content that is hopefully interesting and useful.

Thanks again for visiting!