How can I work this deal?

[Kémo A'akhutera]

Hey BP family! Hope all is well. Got a potential good one on my hands but need some assistance from you all.

2BD/2BA

930 sq ft.
2 car detached garage (matching vinyl siding as what's showing on house.
C+ neighborhood that's VERY popular w/ investors in my area for rentals and flips.

Mortgage payoff: $39k / Taxes current
Owned since mid-90's. Only giving up due to job relocation.

A back patio was converted into a 3rd bdrm back in late 90's but I checked w/ city building inspection office and permit wasn't pulled for it so additional bdrm/SQ. FT not on county records though quality looks to be very soundAlso, 2nd unofficial BA in basement w/ toliet, sink, AND shower.

Newer: roof and windows, glass blocks and insulation in basement, fresh paint in every room. Original wood floors in great shape. This house LITERALLY needs nothing EXCEPT (lol) the hallways reconfig'ed as right now the 3rd bdrm is only accessible thru one of the original bdrms (and wood paneling replaced in added-on 3rd bdrm because, let's be honest, it's some hideous stuff). 

Comps I could find (Zillow/Eppraisal/FSBO.com) within .5 miles and last 9 mos hint at property being worth $67K-$87K (depending on 2bd or 3bd as majority in the area are 2/1).

Seller asked for $48K. I countered with firm $45K, all cash.

Biggest point of contention for me is whether or not it's possible to get the 3rd bdrm / addtl sq ft. counted because of lacking permit issue. Can I legally market it as such if I were to change hallway to make all bdrms accessible from a common area? Is it possible to do anything about it now w/o risking having to tear off addition?

Also, what are some feasible exit strategies considering seller needs cash to relocate as well as payoff off mortgage AND it's almost totally rehabbed already?

Thanks in advance to any and all input!

[Mike Wood]

I would talk to the city about the process of getting the unpermitted work inspected.  Should be a process in place for this, and assuming there not a bunch of illegal problems with the construction, the city will likely work with you on it.  Now if you have illegal plumbing and other things, it might get messier.

The basement is likely not going to fly, as there are usually structural issues with egress and natural light that might be difficult to overcome.  The city can advise you on that as well.

I would not be too worried about the city making your tear it down.