Buying SFH with significant non-permitted upgrades?

[Chris Talley]

My wife and I are looking to purchase a SFH in San Mateo, CA. We're primarily focusing on properties with rentable ADUs for a small house-hack. We've found a property with an unpermitted ADU, as well as an unpermitted bed+bath addition in the main structure. Does anybody have advice on how to properly adjust our offer price to reflect the risk associated with these unpermitted alterations? There's also some deferred maintenance relating to roof and foundation.

Here's how I'm planning to price the property:

1. Start with comps based on the house without any of the unpermitted additions

2. Deduct for the potential cost to tear down all of the unpermitted work

3. Deduct 1.5x the cost of all deferred maintenance, and offer to add this back if the seller completes this deferred maintenance with a contractor whom we approve before closing.

Thoughts? Are significant unpermitted additions such as these generally dealbreakers for you? Also, if we wanted to pull permits for work that's already done, I assume it would require us to essentially tear everything down and redo the work from scratch. Is this accurate?