Sorry you had this happen....But there are a few takeaway lessons here.First - Never use a GC that advertises as any other trade.

I had advertised the house to rent and when potential renters toured the house they loved the house I asked if I would sell it.

If the software is not simplifying your life or making you more accurate, you shouldn't use it.Software does have extremely helpful features like online payments, marketing syndication (click a button, and your property is advertised on multiple sites), electronic document review/signing, maintenance tracking, and owner reports.

If I do the work unpermitted by a licensed contractor, is it illegal to advertise it based on the added bedrooms?

If you have properties, a great way to promote them is with Facebook Lead Form Ads, advertise the specific property (or better yet, a list of properties) and it will attract buyers.

I am pretty sure they don't have a buyer higher than my price because I saw them just advertise it again at my price minus 5k.

In 2023 I did not rent the units out or advertise them.

And then do everything yourself: maintenance, advertising, showing, developing your lease etc. 

Similarly when you are buying pre-owned furniture, people tend to advertise if it comes from a no pet household. 

I can definitely say they delivered as advertised.