Some homes on the market have additions that have not been permitted with their city. Perhaps the addition was self-built or done with an unlicensed group. The addition is well-built and seems to meet code, but the homeowner didn’t want to go through the trouble and cost of having a city inspector come out and verify this, which would result in a permit being issued.
The buyer can get a home inspector to confirm that everything is OK. However, a home appraiser that is sent by the lender to verify the property value, will not give any value to the unpermitted space. This can result in a lower appraisal and the need to re-negotiate the price, since the lender will only lend on the appraised value. Also, should the home be damaged, there might be some rebuild issues with the city or insurer.
Obviously, this is a problem for the seller. The best course is to get permits for any unpermitted space if you are selling a home. Or, having bought a home with unpermitted space, think ahead to getting it permitted. Regulations are only getting stricter, so that what was construction that was worthy of a permit in the past, could be sub-standard in the future.