Open Permit from 2005 - Multi-family Investment

[James Bavaro]

Hey all,

I have an offer accepted for a two-family property that I plan on utilizing as a rental. The property illicit great numbers (ROI, cash flow, sale price, etc.) Just before signing my contract, however, the seller disclosed that there is an open permit on the home to make the property a legal two-family. The permit was opened in 2005, and the construction was (allegedly) completed shortly thereafter. However, it seems like the file was never legally closed.

We've tried negotiating with the seller to deliver the property with a closed permit, however, he will not budge. I did negotiate for a lesser sale price on the home, and won. So, if I were to invest in this property, I would have to close it myself. I completed some due diligence - I spoke with an architect who gave me a quote for about $12K to close the permit. I then spoke to the department of buildings (DOB) who told me that it will only cost about $200 and some time filling out paper work to close the open permit. Two opinions on different extremes...you can imagine how much of a standstill I am at currently in my decision making regarding moving forwards with this property. I feel as if this investment might be a gamble with this open permit, considering it most likely has to pass inspections before the permit is closed. I am afraid that once the house is closed on, and inspections are made from the DOB that they might find something wrong and open a costly can of worms,

Could anyone offer some advice and/or words from experience for when dealing with open permits?