A certificate of occupancy is a document that you apply for in the municipality where you are purchasing a house specifically in the building department, this document certifies that the property you are purchasing is safe to reside in and meets building department codes. The new homeowner is usually the one required to obtain the C.O.
Types of Certificate of Occupancy.
Temporary Certificate of Occupancy – This will allow you to close and purchase the property pending the necessary repairs, you have to perform the repairs within a specific amount of time.
Permanent Certificate of Occupancy – Once you have made all necessary repairs to the property and have followed the building department checklist you will receive permanent C.O.
How does this affect you?
There are many scenarios that may come up which can affect you at closing if you or your buyer has not been able to obtain a C.O. (certificate of occupancy), for illustration purposes I will give you two examples that come from personal experience.
I was the listing agent for a property and we were getting near the closing date as the date approached I inquired with the buyer’s agent if they buyer had obtained the C.O. and his response was no because the mortgage company would not accept a temporary C.O. they will only accept a permanent C.O. to give the mortgage to the buyer. This caused a delay on the closing, added to the buyer’s expenses prior to closing and added more time for the buyer’s agent to spend on the deal to allow access for the buyer to complete all the necessary repairs. This deal could have come to an end but fortunately the buyer had the funds and the time to do the work, it also helped that he really liked the house for his family. The lesson from this is to be aware of the Mortgage company policies for C.O. do not wait until you are near closing to learn about it, it can cost you a deal.
If you’re an investor and purchasing cash, you don’t have to worry about the C.O. too much because you will obtain a temporary C.O. if you’re purchasing cash, if you’re using creative financing strategies make sure you read scenario one above and find out the policy for your lender.
This will give you time to perform necessary repairs and get the property ready for the end buyer who should not have a problem because you did the rehab with valid permits and have followed building department codes 🙂
Where to obtain a Certificate of Occupancy?
To obtain a C.O. you will have to contact the building departments office in the municipality the property is located in. There usually is an application you will need to fill out, pay the fee and schedule an inspection appointment. When the inspector comes he will determine which C.O. you will qualify for, they usually give you a checklist for what the inspector is going to look for when he/she is in the property, after the inspection it’ll take some time for you to be able to actually obtain the certificate.
Other Reasons you will need it.
You may also need to apply for a C.O. if you’re making upgrades to the property, putting a deck, adding additions, etc. The building department wants to check if your construction meets building code and have used approved materials.
I hope this information has been able to provide you with value, if you would like to receive more information like this directly to your email click the button below to sign up for my newsletter and comment below if you have any experiences or questions about obtaining a C.O.