A fix and flip problem

[Jorge Justi]

I started my own business flipping houses 6 months ago. So I bought a house that is my first house. When I bought the house, through my agent, the house had already had an addition in where is the kitchen. I've already fixed the house incl the kitchen. I tried to sell the house.

A person wanted to buy it with a FHA loan. When the FHA inspector went to the house, he realized that the addition doesn't have a permit. I didn't know that this addition doesn't have any permit (I mean that addition is illegal) and I either didn't know how to verify that. I'm not from the USA and I know it sounds stupid but I thought in the US every house must be legal.

Finally, the buyer told to my agent that if we don't get a permit he's going to call to the city to accuse me for the illegal addition in the house. Really, I don't know what I can do. I'm desperate. I was thinking in different opcions but I don't If they can work.

1. Go to the city and I try to explain everything and try to get a permit (I don't know if it possible)
2. Demolish the addition and build the kitchen where it should be.
3. Talk with the FHA inspector I try to explain the issue.
4. Talk with the buyer and beg :cry:

Please any advise will be great help.
Thank you.