You’re searching Zillow for affordable homes near Hilo or browsing houses for sale in Puna, Pahoa, Mountain View or Volcano, and you find one for $150,000. It has a beautiful kitchen, a nice lanai, tropical landscaping and maybe even a few acres of land.
What’s going on? Why is it so cheap?
Sometimes the house really is beautiful and in good condition. What may not be immediately obvious is that it was built without permits.
Unpermitted construction is one of the biggest reasons you see attractive homes at surprisingly low prices in rural communities around Pahoa, Mountain View and Volcano. When shopping for cheap homes on the Big Island, you need to understand more than the asking price. A fully unpermitted house generally cannot be purchased with a standard mortgage, and the photographs do not answer important questions about construction, utilities or county enforcement.
In my earlier article, Why Are 3-Acre Lots on the Big Island So Cheap?, I discussed roads, neighborhoods, location and utility access.
Those factors still matter. But when a property includes a house, permit status becomes one of the first things to check.
Below $250,000, Look Closely at Permits
In my experience working with buyers on the east side, once you go below about $250,000, you are commonly looking at homes that need substantial work, have permit issues, or both.
There are exceptions. A smaller house or a less desirable location, lava zone 1 or 2 can also explain a lower price.
But when a $150,000 house looks beautiful and move-in ready, I want to know whether the house is permitted before getting excited about the price.
An attractive interior does not tell you whether the home has approved plans, completed inspections or approval for residential occupancy.
Why Fully Unpermitted Homes Are Usually Cash Purchases
A fully unpermitted house generally cannot qualify for a standard home mortgage. For practical shopping purposes, treat these as cash purchases.
That financing limitation is a major reason the price is low. Most buyers need a mortgage, and these properties eliminate much of that buyer pool.
A permitted house with an unpermitted addition is a different situation. That does not automatically prevent financing, although the lender needs to review it.
You may be able to obtain financing based on the land, but the lender must accept the property with the unpermitted structure. You cannot assume a vacant-land loan will work.
For the types of properties we are discussing, the land alone might be worth roughly $30,000 to $100,000, depending on the parcel. A loan based on a portion of that value will not cover most of a $150,000 purchase.
Seller financing is another possibility when offered. It does not make the house permitted or resolve the underlying issues.
A Beautiful House Is Not Necessarily a Well-Built House
Some people build unpermitted homes carefully. They know construction and try to follow code, even though they do not complete the permitting process.
Others build something that looks good in photographs but raises serious concerns when you inspect it.
Fresh paint, attractive cabinets and nice flooring do not tell you what is underneath. You need to look at the foundation, framing, roof connections, electrical work and plumbing.
Sometimes a closer inspection reveals that the charming cottage is little more than a pretty-looking shack.
Construction quality and permit status are separate questions. A well-built house can still be unpermitted, and a seller’s statement that it was “built to code” does not establish that it meets code.
Utility Connections Require Permits and Approvals
You cannot legally connect an unpermitted dwelling to Hawaiian Electric or county water by simply requesting service. The required permits and approvals must be in place.
For electrical service, the county must authorize the permanent connection, and the service equipment must be inspected.
That is why many of these homes operate on solar, batteries or a generator and use rainwater catchment.
I have seen exceptions where electrical service was established for an earlier structure and a larger unpermitted house was built afterward. An existing electrical meter does not prove that the house itself is permitted.
Solar and catchment can work well, and permitted homes use them too. But you need to understand whether off-grid living is your preference or a limitation that comes with the property.
What About Internet and Telephone Service?
In my experience, internet and telephone providers are less strict about building permit status than the utilities providing electricity and county water. I often see unpermitted homes with a cable connection coming in from the street.
That means an off-grid house may still have wired internet and telephone service. Check availability with the provider for the specific address, and remember that an existing cable connection does not establish that the house is permitted.
What Is Actually Handling the Wastewater?
If the entire house was built without permits, I would be concerned that the wastewater system was installed without approval too.
Do not assume that something described as “septic” is an approved septic system. Ask for the records.
In these situations, you may find that wastewater is going into a hole in the ground rather than a properly designed treatment system. That is essentially how a cesspool works: wastewater enters an underground pit and seeps into the surrounding ground without the treatment provided by a septic system.
An unpermitted septic installation and a cesspool are not the same thing, but neither should be accepted based solely on what the seller calls it.
Hawaii has prohibited new cesspools for years and existing cesspools generally must be replaced by 2050. That can mean a substantial future expense. You can read more on the this topic on my post The Big Island’s Crappiest Problem.
The County Can Require Corrections or Removal
This is a real risk, and I have seen it firsthand.
I brought a client to view an unpermitted property and saw a letter stating that the house needed to be brought up to code or removed.
That is something buyers need to understand before purchasing an unpermitted home.
County enforcement can involve notices, corrective requirements and fines. Depending on the circumstances, removal can be required. There are documented cases of county action against unpermitted structures, including demolition under a court order in downtown Hilo in 2019.
I do not encounter removal notices often in my work. But a house having stood for years does not protect it from enforcement. Neither does the fact that nearby houses are also unpermitted.
A complaint can bring the property to the county’s attention.
Can You Permit the House After It Has Been Built?
Sometimes, yes. But this needs to be investigated before you buy.
One route involves hiring a Hawaii-licensed architect or structural engineer to evaluate the structure and prepare as-built plans, drawings documenting what was actually constructed.
The review needs to address more than the floor plan. The foundation, framing, electrical work, plumbing and wastewater system all need the appropriate review and approvals. Wastewater may require a separate civil engineer and Department of Health approval.
The biggest obstacle is often what you cannot see.
A house still at the framing stage is much easier to evaluate because the construction is exposed. Once walls and finishes are installed, verifying the work becomes more difficult. The county can require walls in an unpermitted structure to be opened for inspection.
A finished house is not automatically impossible to permit. But opening walls, investigating the foundation, correcting defects and restoring finishes can become expensive.
The architect or engineer takes professional responsibility for the plans and certifications they provide. That is a serious undertaking, particularly when they did not design or observe the original construction. It does not automatically transfer all responsibility away from the owner or original builder.
As-built work can carry substantial professional fees, before you pay for repairs, permits or additional inspections.
If the house was originally built from approved plans and the permit process was simply left unfinished, there may be a more straightforward path. The existing records and missed inspections still need to be reviewed.
Also check setbacks. A house built too close to a property line may have problems that good construction and new drawings alone cannot solve.
Do not buy an unpermitted house assuming you can easily permit it later. Have the appropriate professionals evaluate that possibility first.
Cheap Homes Can Be Opportunities, With Real Tradeoffs
There are beautiful unpermitted properties on the east side of the Big Island. Some are well built and may make sense for a cash buyer who understands the situation.
But the low price comes with financing limitations, questions about construction and utilities, possible wastewater expenses and the risk of county enforcement.
Those same issues can affect your ability to insure the property and sell it later.
When you see a beautiful house for $150,000, ask why it is priced that way. Then decide whether the savings justify what you are taking on.
If you are looking at homes in Hilo, Puna, Mountain View, Volcano or elsewhere on the east side, I can help you understand what the listing photographs leave out. Contact me at dan@livingonbigisland.com before you get too attached to the price.
