SAN DIEGO -- A brand-new, 5,000-square foot home sits vacant, with "no trespassing" signs and a wire fence shielding the white stucco structure from curious onlookers.

On the market for $350,000, the home appears at first glance to be a rare bargain even by today's standards of short sales and foreclosures. However, the 10News I-Team learned there is one big catch -- the home, as built, is not safe.

"They didn't do it correctly. It's falling apart, it's just a mess," said Wayne Warner, who lives in a condo development next to the home at 900 West Quince. He and other neighbors said they have complained to the city about the home for years.

"It's been such a kind of pain for everybody in the neighborhood," pointed out neighbor Alex Manaquio.

The owner and builder was Shad Martin, a contractor who had his license revoked by the State Contractor's License Board.

His nearly completed home was on the market at a price of nearly $3 million before anyone realized that Martin had built it illegally. Authorities said Martin never got a grading permit.

"Everybody was livid," said Warner.

Martin did have a valid building permit for the home, and a deputy city engineer told the I-Team that normally the grading permit would've come first.

Records showed that over two years, building inspectors from San Diego's Development Services Department visited the property at least 25 times to check the progress of construction. However, illegal grading on the property went unnoticed.

Manaquio questioned, "How do a bull dozer and cement trucks and everything show up in a neighborhood and a house show up with no permits? Crazy."

Neighbors said code enforcement took no real action on their complaints as the home was being built, until the heavy rains in 2004 exposed the problem. Water and mud slid down the illegally graded hillside and onto the properties below. Supports for the balcony of the home bucked. At that point, code compliance employees issued a stop-work order. The city attorney also got involved.

Chief Deputy of Code Enforcement Diane Silva-Martinez said Martin was charged criminally.

"Basically, six counts, charged twice, all dealing with failing to obtain a grading permit," she explained.

Martin pleaded guilty to four misdemeanor counts, was put on probation and promised to bring the house to code.

Silva-Martinez said he never did fully comply.

Martin was threatened with 30 days in jail. But as a fateful court date approached, he transferred the property to someone else. That move closed the criminal case, as Martin was no longer legally responsible for the home.

Martin defaulted on the loan, and Wells Fargo took the property back.

Neighbors wonder how the house was nearly completed before the original grading flaw was noticed.

In a statement, the Development Services Department pointed out that a grading permit was needed for the land around the house, but that the grading underneath the house was legal.

The department said that one of the inspectors allowed construction of the home to continue even though the illegal grading issue was not resolved. There is a new system tracking system in place to avoid this type of problem in the future.

Whoever buys the property also buys the liability, including a driveway and walls built in the public right of way without a use permit.

The I-Team tracked down Martin to a home in Bay Park. He declined an on-camera interview, but said over the phone that the whole mess was "ludicrous stupidity" on the part of the city. He said he tried to bring the home to code, but that Development Services didn't process his requests efficiently.

The house is currently in escrow, but it has fallen out of escrow before. If it is not sold soon, Wells Fargo has told the city that it will tear the house down.