As the short sale homes and bank owned homes are flooded for the home priced under $500K.We found a lot those homes have non-permitted alternation. It could be add a room without window or convert the garage to be part of living space.  The above photo is a Sunnyvale REO home. The garage converted to 2 bedrooms and one bath. What is the in and out of those non-remitted constrution home?"

This Sunnyvale Bank owned home garage converted to a big living room. The non-permitted construction is an issue in any home sale. The bank owned home sellers do not disclose it and it will only sell the homes as  "AS IS" condition also. On top of this some lenders don't loan money to  the homes, so many of them sold to the all cash buyers. 

The new buyers will assume all the responsility. If the neighbors complain to the city of this addition. then  the city  building code inspector  would decide if the structure stays or goes. Some of the cities will require the buyer to convert the garage back as an orginal garage. Some cities will allow you to  retrofite up to the current building code and issue you a code compliance.

Buying a Unpermitted alternation homes do have some risk involved.