Move-In Ready House with No Permits

[Ian Tudor]

I'm in the process of closing on a house. The house was purchased 2010 and has had extensive rehabilitation work completed. Everything has been replaced (plumbing, electrical, heat pump, central A/C, etc). The owner completed all the work himself and owns a construction and demolition business. I feel this gives him some credibility. However, there are no permits for the work finished. The house is move-in ready.

This past weekend, I had an inspection and there were no real issues. My only concern is that the owner's negligence could become my liability later down the road. I spoke with my lender, and he mentioned that since there were no additions to the property, no permits were necessary. I'm not sure I buy that.

There are so many positives about this property and surrounding area that it is hard to let go. At the same time, I could see this unraveling into larger issue.

I need your help, BP.

What is the worst that could happen? I want to understand the downside risk associated with this issue.
Would you pass on this deal?
How can this issue be mitigated?
Am I making this a bigger issue than it actual is?

Thank you so much for you support and guidance.