Similarly, we learned that just because a contractor has a higher price and a big business does not mean they will be professional or reliable in unexpected situations such as our local permitting process and sending in the proper forms to pass inspections.Only higher contractors that are references from trusted sources.

Having the money lined up doesn't help without a deal to do that is properly underwritten. 

I just wanted to get some clarity on proper protocol.  

Has anyone bought a non-conforming and successfully renovated it with proper permitting?

He missed that some electrical outlets were malfunctioning, the plumbing in the shower was not working properly, the power box was old and outdated, the AC was not working, etc. - Don't be afraid to make sure everything works well and if it doesn't, don't be afraid to ask them to fix it or ask the seller for a credit.

@Brandon Mitchell I work full-time as a GC in the Twin Cities and Minneapolis has a solid information database for properties within their official city limits.

I'm not asserting this is the proper way, but it's the procedure we've been using with our commercial tenants. 

Its not the end of the world if you cant officially market it as a 5th bedroom.

You could have it framed and let him lay the floor boards-assuming he is skilled and will do it properly.

Usually when those conversions happened utilities were not split properly especially since no building permit or proper inspections of the quality of the conversion work performed.