It sounds like the owner did the work and not pulled the PERMIT.

and how fast things are selling in your market. of course, there are other possible issues that can creep in - I saw an article today about huge permitting delays (a couple months in some cases!) 

I do not have experience with converting single family homes into multi units, but again if the numbers work and you can get all the required permits to do so, then I do not see why not. 4.

@Dennis Williams - We were limited to a 4 unit building.We had looked at one property that had an un-permitted 5th studio and originator would not look at it at all.Good Luck!

Here's the problem, 2 of the homes were done with out permits.  

That price does not include cost of land/property, permits, or bringing water, sewer, and electrical lines from street, etc.

I was selling my flip property for $199kI had the property appraised at $205k.Once I had the property in contract with an FHA buyer, the bank sent an appraiser and she came in at $185kIn her appraisal she wrote that part of the house (the bathroom) was not done with permits and no permits were on file at the city.

@Kahanu Noa Well here it is the department of planning and permitting.  

An unexpected thing for me would be: Getting a state rental permit / inspection for the unit that is being rented.  

Farr,32 the Minnesota Court of Appeals invalidated a purported declaratory cancellation of a residential purchase agreement on the ground that there was no unfulfilled condition so as to permit use of that procedure under Minn.