My answer would have been, "I can only tell you what has been disclosed, but we need to research it thoroughly to make sure the information is accurate. Let's look at the written disclosures to see what the seller has actually stated and verify with the building department to make sure all info is accurate and understood fully."
Listing agents, sellers, and buyers agents can make honest mistakes. Subterfuge is rare, but it can happen, and you are right to double check any info to your own satisfaction before you purchase. If you start from the assumption that anyone can make a mistake , and investigate everything for yourself, you will be far better served. in any property you end up buying.
I wouldn't say his answer alone is cause for changing agents. It is, however, important to trust your agent, AND to not rely exclusively on their advice, either. You should feel that you are working as a team to discover any and all facts about the home that may affect your decision to purchase. If you are feeling uncomfortable about experience, talk it out with your agent. It's okay to ask how long they have been in the business. If you continue to feel uncomfortable, be honest, and tell them what doesn't work for you. You may both feel it doesn't work, and if this is the case, it's better to move on early than to drag it out.
I think how you deal with the difference about the permit status of in-law from a strategic standpoint is worth discussing. There are lots of non-permitted spaces out there in our market of older homes, so this is not uncommon to see, and you may run in to it again. You may feel more comfortable if you change the language you use from "legal" to "permitted". And by "permitted" I mean that the work was done based on obtaining a permit from the local building department and completed with approved plans. There is a distinction to be made between work that was done with a permit and work that was done to code. It may have been done to code, even if the owner did not pull a permit. (And, the work may have been done by a prior owner than the current seller.) Most cities don't come looking for non-permitted work, unless a complaint is filed, but they have recourse in the form of penalties they can inflict if they become aware of a non-permitted structure or modifications, or the non-permitted use of a structure. These penalties range from fee and instructions to correct and make legal, or removal of the offending modifications.
Since you cannot use the income from an in-law unit to qualify for a loan, (it has to be a legal duplex to use the income), it becomes a question of 1) what potential issues are created by an non-permitted in-law space, and 2) how does it affect the real value of the property.
(You probably already know that an in-law unit can be legally recognized as an in-law, but that does not make the property a duplex. In order for the income to help with the loan, it has to be recognized in the assessors record as a duplex.) If it is disclosed by the seller as a permitted space, then it is legitimate for you to submit your offer based on that disclosure. If you determine during your inspections that it was done without permits, or the permits were never finaled by the building department, then you have grounds to have a further discussion about the actual valuation before you remove your inspection contingency. If there are multiple offers, and it is a property that you really want, you might be better served to write the offer based on the seller disclosures, and re-evaluate based on discovered facts. If you do not have to compete to get your offer accepted, then you can discuss with your agent whether the better strategy is to present the offer based on their disclosures and renegotiate based on discovery, or to investigate up front and provide that info along with the offer. Who the seller is and why they are selling is an important factor in that discussion, and you want to tailor your strategy to the situation.
Hang in there. Buying a home is stressful, there will be lots of things to investigate. Keep asking questions, it's the very best mechanism for getting educated.
Each of these scenarios has to be managed based on the tangible info available.