Right away, I need to mention that EVERY county is different. So, do not take my answer as gospel. You'll need to check locally but, in general and in the order you presented the questions:

1.) Consequences to you if the previous owner added the "above the garage apartment without county permitting/approvals?

Worst case: The governing agency finds out about the apartment & makes you rip it out.
Most likely case: They will make you pay a fine & your property taxes will increase based on the new total square footage.

2.) "How could this be remedied"? Call the Planning Department and/or the Zoning Department & just ask. If you're in a disclosure state, it's public information. A consequence of making that phone call though is that the governing agency pays an unpleasant visit to the current owner.

3.) "What are the appraisal issues"? The appraisal your bank orders will be "as-built". The appraiser SHOULD check for proper permitting. If the additional living area was not authorized...it SHOULD be noted in the appraisal & some "adjustment" to value will be rather arbitrarily calculated because that's really all that the appraiser can do. (If the appraiser was really tough, they might refuse to include the square footage in any value considerations, but I doubt it.) For tax purposes, you do NOT HAVE TO ALLOW THE TAXING AGENCY ACCESS TO YOUR PROPERTY, or at least not in my state.

There are illegal apartments all across America in every village, town, & city. It's a very common situation. It's not right...but it's common.

Another thing to consider is insurance...should you experience a fire or other disaster, your insurance carrier may refuse coverage & try to cry "Foul!".

Should you not buy the property if the apartment is not legal? That's a judgment call & I can't make it for you. Many, many people do purchase these properties. Others who are more risk adverse take a pass & find another property. See what your buyer's agent can dig up & then make a decision.

Tricia

IMO, you or your agent can also just ask the seller for the permits and the final approvals (if you are in NJ, this is REQUIRED of the agent).

If he can't produce them you then know that it was built illegally. Your attorney should then include in the purchase contract the requirement that the seller obtain all permits and finals before the sale..and if not...the deal is off...if you should so choose.

"IMO, you or your agent can also just ask the seller for the permits and the final approvals (if you are in NJ, this is REQUIRED of the agent)."
logic, can you reference what the RE buyer's agent is "REQUIRED" to do regarding permits and approvals in N.J.? I'm not sure I understand.
TIA

Thanks for the responses. I hope that we can get this all sorted out, because I'd like to be able to close on this house.

berniek:
"logic, can you reference what the RE buyer's agent is "REQUIRED" to do regarding permits and approvals in N.J.? I'm not sure I understand.
TIA"

Sure. If a seller states he has permits, the agent is required to perform due diligence in ascertainng as to whether or not that is the case....or, be liable for fraud if the seller lied about having the permits.
A link follows to the disclosure form and the requirements thereof; the expiration date is not relevant to the regulation as it still is in effect.A link follows.

"c) A real estate licensee shall not be subject to punitive damages, attorneys fees, or both under N.J.S.A. 56:8-19 for the communication of any false, misleading or deceptive information to a buyer which had been provided to the real estate licensee by or on behalf of the seller of real estate located in the State of New Jersey if the real estate licensee:

1. Had no actual knowledge of the false, misleading or deceptive character of the information; and

2. Made a reasonable and diligent inquiry to ascertain whether the information is of a false, misleading or deceptive character...."

Here is a link that might be useful: PROPERTY CONDITION DISCLOSURE

"... the real estate licensee visually inspected the property with reasonable diligence to ascertain the accuracy of the information disclosed by the seller."

WOW! The agent in N.J. is now made an inspector, very interesting to see how different RE laws can be.

This is what our law says:

Do I, as a seller's agent, have a duty to inspect my listings to discover potential property condition problems which should be disclosed to the buyer?

No. C.R.S. § 12-61-804(3)(b) of Senate Bill 223 states: "A seller's or landlord's agent owes no duty to conduct an independent inspection of the property for the benefit of the buyer or tenant and owes no duty to independently verify the accuracy or completeness of any statement made by such seller or landlord or any independent inspector." It is not clear whether the seller's agent has some responsibility to inspect the property for the benefit of the seller as part of the duties of utmost good faith, loyalty, and fidelity.

Thanks logic!
ref:
http://www.frascona.com/resource/jg-of793.htm#Q6

Logic, isnt a title and municipal search done in NJ by the title company? Violations come up on 95% of the transactions in NY during the municipal search. The seller corrects them prior to closing. I can't imagine having to spend the hours researching CO's for buyers before they are even make an offer on the property.

Berniek, from the excerpt you provided, it does not appear as if an agent is required to verify anything said by the seller that they relay to the buyer...I agree it is not clear with regard to the agents responsibility to do so for the seller...but IMO, it would seem to me that if the state does not care if the agent passes on unverified info to the buyer, they certainly would not care if the agent does not take the time to find out if the seller is wrongÂand then correct him/her.

Then againÂlaw is always subject to interpretationÂand that is certainly language that should be changed in order to avoid any misunderstandings.

linda117: "I know that a title search is doneÂbut as far as I know there is no municipal search performed by the title company in NJÂthat is something that is usually done by the buyerÂs attorney."

Be that as it may, by the time the process gets to this point in NJ, the buyer has already spent money on inspections and, considering how many may be needed, this could be in excess of 2K or moreÂ

Therefore, the point is to find out these issues before the commitment is made and money spent, so a buyer can choose as to whether to proceed with an offerÂor not.

There was a lot of understandable angst on the part of the realtors in NJ when this was promulgatedÂas they felt that there was an undue onus put upon them in terms of verifying items that was beyond their expertise.

However, on the flip side, NJ has something called the "Entire Controversy Doctrine" which means that if one person is sued, every single person involved in the transaction is named at the same timeÂor else the plaintiff forfeits their right to sue later if it turns out that they were indeed involved.

That said, realtors are exempt from being sued in this manner if the info they relay was provide by a licensed professionalÂin this caseÂthe town building department.

Consequently, most agents have now come to see this as a benefit to themÂ..a lesser of two evils so to speakÂ.as performing due diligence will eliminate their liability in this issue.

One more pointÂ.NJ has five hundred some odd municipalitiesÂ..obtaining this info is generally a quick, easy and painless process, as the span of control is fairly small.

To add to that, many towns, such as ours, also require a "construction clearance permit"Âin other words, if one takes out a permit to let's say build a garage as is the case with the house that the OP wishes to buy, Âbut never gets the final, title canÂt change hands without the final.

This eliminates a problem for the buyer those sellers who DO have a "permit"Â.but never went further with the rest of the processÂfrom selling the house without all final approvals in place.

All of the agents know this, and are required by municipal ordinance to verify the status.

Hope this helps.

Thanks for all the comments & suggestions. We visited the planning & zoning department today to find out about whether the apartment had been permitted and usage issues.

We were told that the city was aware of the property & that a letter was about to be mailed to the owner requiring him to remove the kitchen in his "unpermitted apartment". He would need to obtain a permit for the "undoing" & would need to have the 220 electric capped. Then he would need to obtain a permit for the structure. They said that in a R1 zone, one could have a guesthouse & people could stay in the apartment, but there could be no stove, microwave, or any cooking whatsoever.
And they said that the new owner would have to have this work done, should someone buy this property.

So our contract is now terminated, and we're back at square one.
Thanks again.

Well congrats for finding the info. I'm sure you are relieved to say the least.

In my jurisdiction you may build additional apartments or cottages on a residential property providing they are intended solely to house additional members of the immediate family such as a "mother-in-law" apartment or groundskeepers, chauffers or house staff. The additional living structures may not be offered as a rental property nor shall they be used to generate any income to the property.