Having your property red-tagged can be a stressful and potentially expensive hurdle in your construction project. Not only doesn’t it halt progress on your property, but it can also mean you’re responsible for taking care of additional costs and repairs.
Let’s discuss what a red-tagged property means, what happens when your property gets red-tagged, how to remove a red tag, and more.
Summary
- A “red-tagged” property is a property that violates certain safety codes by the county which make the home unsafe and uninhabitable
- The three major types of red-tagged codes are gas, electrical, and structural
- Red tagged properties tend to have significant damage and extensive rehab to bring back to normal
What Does a Red-Tagged Property Mean?
Think of a red tag as a big red stop sign on your project. A city inspector will put a large, red notice on the front door of your property. This signals to you, your contractor, the construction workers, and everyone in the neighborhood that this property is inhabitable. You’re then prohibited from entering the property without written authorization from city code enforcement.
Recommended Reading: Second Home vs Investment Property
In addition to the home receiving a red tag, the owner of the property will also receive a letter from the authorities informing them of the code violation. The letter will include important information like the reason for the red tag, what specifically needs to be addressed, and the amount of time the property owner has to fix it.
The red notice itself that is stuck to your front door has to remain there until removed by the inspector. Going against these regulations can result in fines, liens, and other costly consequences for the property owner.
Red Tag Code Violation Explained
Not all red tag code violations are created equal. For instance, you could have just a portion of your property red tagged, like the electrical system or gas lines. Let’s review the different types of red tag codes along with explanations for each one.
Different Types of Red Tag Codes
Gas Being Red Tagged
Your gas line, or appliances that use natural gas like water heaters, furnaces, and gas stoves, can be red tagged individually. If a technician from the gas company arrives at the property and finds an issue with the gas line or appliances, the technician might red tag the appliance or gas meter. They could also shut off your property’s access to natural gas altogether.
Red tagging your gas line is done for safety reasons. A technician from the gas company is not going to allow a property to have an unsafe gas line or appliance because that can cause dangerous gas leaks, fires, and even explosions.
Thankfully, many red-tagged gas issues can be fixed by replacing faulty parts or simply purchasing new appliances. After your red tagged issue with your gas has been properly fixed, the technician from the gas company will return to your property to remove the red tag and return service to the property.
Electric Red Tagged
The electrical system on your property can also be specifically red-tagged. A local inspector or a technician from the electric company will red tag your electrical system if they find faulty wiring or a faulty electrical panel on your property.
If you had work done on your electrical system that wasn’t done properly or safely, this can lead to your electrical being red-tagged. To fix this problem, you will need to have the electrical issue addressed by a licensed electrician. Then the local inspector or technician can return to the problem to determine that it’s safe and remove the red tag.
Structural Red Tag
If your project has received a structural red tag, it means you or the contractor you hired most likely failed to file a building permit. In addition, your building permit could have been rejected and you proceeded with the work anyway.
Building permits are required when a property is built or undergoing major structural renovations. Plans must be submitted to the city where they are confirmed to be up to code before you are issued a building permit.
There are many reasons your project could receive a structural red tag. Perhaps you don’t have money to pay for the building permit fees, the plans your architect drew up are wrong, your contractor failed to pull permits, or you forgot to pull permits altogether.
No matter the reason, to move forward with the project you will need to resolve the issue that’s caused your property to be red tagged. To proceed, you might need to have your architect fix your plans, pay the building permit fees, or resubmit your building permit to the city for approval. It can be a very time consuming process.
How to Remove a Red Tag?
In order to remove a red tag from your project, you’ll need to understand the reason it received a red tag in the first place. Whether it’s due to failing to pull a building permit, faulty gas lines to the property, or a bad electrical panel, you need to know the reason.
Once you know the reason your property has been red tagged, you’ll need to professionally and properly resolve it. If you need to fix your plans, have your architect draw up new plans and submit them to the city. If you have faulty wiring, hire a professional electrician to fix it.
After you’ve properly fixed the issue, you can call the city and request another inspection. An inspector from the city will then come out, inspect the property, and confirm the work was done correctly. Once the city inspector knows your property no longer poses a safety threat, they will remove the red tag.
Can You Sell a Red-Tagged House?
Yes, you can sell a red-tagged house. However, it’s not a straightforward process. Selling a red-tagged property means that it will be sold with a lien on it, which is a more complicated process.
Most financial institutions will be hesitant or completely opposed to financing a house with a red tag. Most banks do not want to finance a property that is inhabitable or requires extensive repairs before it can be occupied. If you are looking to sell a red-tagged property, you’ll most likely be selling to a cash buyer who’s buying the house as is. One possible financing solution is an FHA 203(k) rehab loan. However, approval will depend on the extent of the damage of the home.
How to Find Red Tagged Properties?
There are many ways to find red-tagged properties, and each method depends upon who currently owns the home. For example, red-tagged properties where the owner has failed to resolve the issues end up being owned by the state.
Each state has its own method of listing and selling red-tagged properties. Most states have a section on their website for properties that are available at auction. This is one way of finding red-tagged properties.
The other way would be by knowing the area. If you drive by a red-tagged property that also has a “for sale by owner” sign in the yard, you can contact that number to find out more information about the home. It takes some digging, research, and ingenuity to find red-tagged properties that aren’t yet owned by the state.
The Risks of Buying a Red Tagged Property
One of the first risks of buying a red-tagged property is that you might not be able to receive traditional financing. However, if you are a cash buyer or are obtaining alternate financing, you won’t have to worry about this.
Beyond having difficulty obtaining financing, the risks of buying a red-tagged property include a variety of financial, legal, and construction headaches. After purchasing a red-tagged property, the task of solving the issues that caused the red tag now falls on you. You’ll also be responsible for any liens on the property resulting from the red tag.
Conclusion
When it comes to having a property that’s red-tagged, you’ll want to fix it correctly and quickly. As either a property developer, contractor, or architect, you want to maintain a reputation for doing the work properly and ethically. If you’re a homeowner looking to inhabit a red-tagged house, you’ll want to resolve the issue quickly. This is to prevent any further expenses so you can inhabit the house.
Red-tagged houses can be complicated and expensive. While this might deter most buyers, they also present a unique opportunity for investors. After learning more about red-tagged homes, would you consider purchasing one?