It seems one room was added without permit can you still rent the home as 2 bedroom instead of one or do I have get approval from city to this or what should one do to rent home as 2 bedrooms?

My contractor did not pull the permits for construction like he said that he did, no to mention that I paid him for.

This list includes : lot survey, Temporary electric, site plan, engineer costs, water hookup, energy calculations, health department cost for septic/sewer, permit fees, and site clearing.

Purchaser further agrees that in the event Seller does not apply for permits necessary to construct the Property within 30 days or does not start to construct the Property within 90 days,  after the date the deposits are made, Purchaser agrees to such longer period of time required by Seller to take such actions.Is this type of language normal for multi-unit construction? 

If the structure of the lease permits you to move to month-to-month, you'd need to follow your states laws and move to not renew the lease...pretty straightforward. 

It appears that both are currently rented and have been so since it was permitted as a duplex in 2013.

Its all relative @Ashland Bishop...there is nothing wrong with renting if its cheaper than owning...irrespective, everyone has their own rationale for everything they do...I don't think there is a right answer you'll get from anyone here...My take is that owning real estate has way too many long-term benefits and should always be a first choice unless you are in a market with extreme price points...and renting permits you to funnel more free income toward other investments, etc. 

The process (surveys, permits, design) will not bother any tenant but construction will probably start this fall.

You likely have no grounds, based on the permitting/duplex issue to get your inspection/appraisal costs back....I think I recall a verbiage change in the FARBAR 4-5 years ago and these issues have to be discovered/dealt with during your inspection period. 

The project I'm referencing got the re-zoning, but then permitting was stalled when the City "quasi" changed their mind about density and wanted to pull back a little.