I have also watched as my parents built a beautiful 5400 sq ft luxury home in Texas without a single permit. This saves a significant amount of money over homes built in Seattle for example (approx $200K). My parents built their home for about $150K. NOT ONE PERMIT! All of the work is to code.
Lets face it. People survived for years and years without the permit process. I see virtually no benefit to permitting in this age, other than a way to support bloated, overpaid local governments.
I agree with all the previous posts. With so much inventory, it is hard to accept these properties that have permit challenges. It could be built fine. But it also could become worthless at the prospect of ripping apart walls to see support structures and electrical work.
Maybe it is the actual lot that you are interested in and valuing the property means bull dozing the property. In this market, it is fair to offer at the value of the land/home site. This home sale will resort to all cash offers and those are few and far between in this market.
Definitely, this type of purchase is best for the savvy buyer or developer willing to endure the risk involved.
There are two different valuations that come into play when we talk about these situations. The first is the value placed on such a property by current market demand. The other valuation comes from a licensed appraiser.
Given the uncertainty of unpermitted work, an appraiser will not be able to place any value on such work. For example, say a Buyer places a $500K offer on a home that has $50K in unpermitted remodeling. In this simple case the appraiser would assign a $450K value, which would require the Buyer to come to the escrow table with an additional $50K as the lender would only provide financing on the appraised value of $450K. Another issue is that of safety.
Also, do you really know that the work was done properly? If not, you may want to bring in individual trades to confirm how "stable" the electrical and basic structure is.
In short, buying a home with unpermitted remodeling is gambling with your financial and potentially your personal safety.
This could rival opening Pandora's box.
We recommned seeking legal advice and contacting the city. Make no mistake, the city doesn't care about "AS IS"....they still view this home as being a serious violation.
This is not legal advice but the range of consequences could be: fines, no certificate of occupancy, inspections, correcting deficiencies etc.
Our recommendation is to proceed with caution and with legal support.