The popularity of do-it-yourself remodeling shows on television these days has inspired homeowners everywhere to tackle both large and small renovations on their own.
Unfortunately, sometimes they proceed to remodel without bothering to get a permit. In some cases, that's done to avoid additional hikes in the taxes (like when a second bathroom is added). In other cases, it may be done out of inexperience. Sometimes, the homeowner just doesn't realize that they need a permit. Either way, it can become a big problem years down the road when they put the property on the market for sale.
If you're the buyer and your home inspection reveals a renovation that was done without a permit, should you cancel the deal? Honestly, there's no perfect answer because the right call is going to depend a lot on the circumstances. Here's what you should consider:
What are the local rules on renovations of this nature? Rules about what sort of work do and do not need a permit can vary greatly from one area to a next, so be sure that you even have an "illegal" renovation before you worry.
Are the renovations up to code? Do they appear to be done correctly? You don't want amateur work troubling you in the future.
Will you be required to tear it out if the city finds out? This is probably the number one concern that you should have because of the potential expense and trouble you could experience.
Is it going to cause trouble for your loan? You may have trouble getting a loan for a house with two baths and a garage if the property is shown as only having one bath and a shed and the additional feet can't legally be counted on the appraisal.
What penalties have to be paid? If the city allows you to obtain a permit at this late date, there may be fines or late fees assessed that could be prohibitive.
Permit issues can be extremely troublesome if you have your heart set on a home that had any unregistered "work" done on it. Before you decide how to proceed or agree to the sale, it's wise to seek advice from an experienced real estate attorney in your area.