House with unpermitted MIL basement apartment, risk?

[Jack B.]

I'm under contract for a house that has an unpermitted finished basement and garage conversion to bedroom and bath. The basement has a separate entry, and although it all looks like it is done by a pro, it is unpermitted. The thought that keeps crossing my mind is that, if he could get a permit before selling, why wouldn't he? He is leaving 50-75K of money on the table with the unpermitted conversion.

Since I plan on occupying the house as my primary residence and renting out the basement, the issue of insurance and liability comes into play. I have no protection from my insurance company, if my tenant gets injured down there.

I am scheduled to have my home inspector look at it Thursday, and he is a former house builder, but he will not be able to tell if all of it is up to code I'm sure. Also, I spoke with the city permit office, and they have Already Built Construction Permits, however, there is no telling if they will permit it or not, without them coming out to look at it. Which could result in being told to undo it, which costs money, though is unlikely from what I've read.

I've seen a lot of realtors online mention that this is actually really common. Still, there is risk, no? Originally I thought it was enough of an opportunity that I'd at least get it inspected, but now I'm wondering if even that is just a waste of money/time.