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It looks perfect in the listing photos: A charming four-bedroom home on a quiet street, complete with a freshly carpeted bonus room that’s “ideal for guests.” But on the home tour, you notice there’s no heating or cooling, no closet, and most critically, no window large enough for someone to escape in an emergency.
Stories like this are becoming more common. During the COVID-19 pandemic, with contractors backlogged and space at a premium, many homeowners converted basements, garages, and attics into bedrooms or offices—often without pulling permits or following building codes. Now, those workarounds are hitting the market, and what’s marketed as additional square footage can actually be an illegal code violation in plain sight.
Unpermitted conversions can tank financing, void insurance coverage, and even put your life at risk. And while buyers often assume their agent or home inspector will catch these issues, that’s not always the case. In the end, it’s often up to the buyer to confirm that every room in the home is up to code. Here’s how to spot the warning signs—and what to do if you don’t like what you find.
How common are unpermitted conversions?
The pandemic didn’t just disrupt supply chains and real estate prices, it also overwhelmed local building departments. As permit offices closed or slowed to a crawl, and contractors became harder to book, more homeowners took matters into their own hands.
“It was easier to forgo the permit process, get the work done, and utilize the space,” says Lisa Alajajian, incoming president of the American Society of Home Inspectors. “Especially with people living in very small homes that were now quarantined. … They needed some additional living space.”
Across the country, inspectors are encountering a wave of makeshift conversions—especially in garages, attics, and basements—that were done off the books.
“We routinely find garage, basement, and attic spaces that have been converted into bedrooms or living areas without permits,” says Reuben Saltzman, owner of Structure Tech Home Inspections in Minneapolis and St. Paul, MN.
“Unpermitted conversions are very common in Southern California,” adds Whitney Hill, CEO of SnapADU in San Diego. “In an effort to create more usable space or house additional family members, homeowners often complete these types of renovations themselves or hire a contractor to do it off the books.”
Becky Pendergrass, a Nashville, TN–based agent with Benchmark Realty, says they’re especially common in older homes and rural areas where there are fewer eyes on what’s being built.
“Someone decides they need an extra bedroom or bonus room and just throws up some drywall and carpet without ever pulling a permit,” she says. “From the outside, it looks like added living space, but when you dig a little, it’s almost always unpermitted.”
Now, as those homes hit the market, what began as a quick solution is creating new headaches—for buyers, sellers, agents, and inspectors alike.
What makes these conversions so dangerous?
While many of these spaces were created out of necessity, they are rarely built to code, and because they skip the permit process, they also skip the inspections that ensure basic safety.
“The biggest issue with unpermitted work is the lack of oversight and safety assurance,” says Hill.
That lack of oversight can lead to serious hazards. Saltzman regularly encounters makeshift bedrooms with overloaded electrical circuits, exposed wiring, and heating sources that pose fire risks.
Pendergrass has seen similar problems firsthand.
“You’ll walk into a ‘bedroom’ and realize there’s no return vent, no egress window, and two space heaters plugged into an overloaded outlet,” she says. “It’s a fire hazard, hard stop.”
Even the most basic systems can be dangerously improvised.
Kyle Williams, a real estate attorney in Atlanta, recalled one home where the front porch light and the tool shed were both powered by extension cords, instead of a code-compliant electrical system.
And while some issues might be visible to a trained eye, others—like mold from unsealed concrete or hidden plumbing errors—might not surface until they cause real damage.
How to spot an unpermitted conversion
“It’s up to the buyer to do their due diligence,” says Alajajian. “Whether that’s through their attorney or a home inspector that they want to pay to go above and beyond, but it’s ultimately up to the buyer to do their homework.”
That starts with checking local permit records. Most cities and counties now have searchable databases online, and a new tool from Realtor.com® allows you to review the permit history for any listing, in addition to price and tax history—kind of like Carfax for houses. When you look at a listing, make sure to look under “Property History” to find this information.
“If something doesn’t show up in the records, that’s your red flag,” says Pendergrass.
For example, if the listing description says “gut renovated kitchen” with flashy pictures of a brand-new range and fancy lighting, but you don’t see any permits, that’s a red flag.
Other clues often lie in the details. Mismatched flooring, irregular ceiling heights, missing HVAC vents, or rooms without smoke detectors can all signal off-the-books work.
“Inspectors can often spot signs of amateur work and guide buyers to dig deeper,” says Saltzman.
Williams advises buyers to request documentation from the seller upfront.
“Buyers should also request all permitting information and documentation from their seller during any due diligence investigation of a potential home to buy.”
The high cost of making it right
For homeowners hoping to legitimize an unpermitted space, retroactive permitting might be possible—but it’s rarely straightforward.
Bringing unpermitted work can be an invasive process, says Alajajian. That’s because a lot of the work could be hidden behind drywall.
“I’m going to have you open up the wall in four or five areas so I can inspect it,” she says. “That’s rare, but it does happen.”
That aligns with what inspectors and contractors see across the board.
“Costs can range from a few hundred to tens of thousands,” says Saltzman. The price tag depends on how far off-code the work is and how much demolition is required to expose hidden systems like wiring or plumbing.
And if the original build encroached on zoning rules or exceeded allowable square footage, “It could also require a longer, more complicated solution, including variances to increase lot coverage or allowable living conditioned space,” adds Williams.
What happens during a sale? The financing fallout
Even if unpermitted spaces look move-in ready, they often don’t count where it matters most: In the appraisal.
“An appraiser likely won’t count it as finished square footage,” says Pendergrass. “That’s a huge problem if the seller priced the home as, say, a four-bedroom when it’s officially still a three-bedroom on paper.”
That misalignment can have ripple effects throughout the deal. Financing may fall through, especially with FHA or VA loans, which require all habitable spaces to meet safety and building codes.
“Unpermitted work can derail a deal,” emphasizes Saltzman. “It’s a legal and financial headache all around.”
Even if the sale closes, the financial risk doesn’t end there. Insurance companies won’t cover damage in spaces that were never permitted, warns Alajajian.
“So, say, someone buys a house [with unpermitted work] and there’s a fire,” she explains. “If the insurance company comes in and they check the permit trail and find out that that work was done without a permit, they can deny a claim.”
And while buyers might assume it’s the agent or inspector’s job to catch these issues, Alajajian emphasizes it’s the buyer’s responsibility.
“A buyer today, no matter where they’re purchasing, needs to do their due diligence,” she says. “They need to research the property so they know exactly what they’re getting.”
In a market where every square foot counts, buyers can’t afford to mistake a shortcut for a selling point—because when a spare bedroom isn’t what it seems, the true cost might come long after closing.