Do you have a home listed that has had construction done without permits? How can you tell? You can ask the owner or you can compare the tax records to the listing write-up. I see listings all the time that have 4 bedrooms / 3 bathrooms, and when I look at the tax records, I see 3 bedrooms / 2 bathrooms. That's a good indicator that work has been done that was not under a permit and not inspected.
You can also call the local inspections office to see if permits were ever pulled on the property. I was in the inspections office today, and I asked the permit tech what happens when a property is sold that has un-inspected work done on it. She said the liability passes to the new owner.
That inspired me to call my insurance agent about liability in the same case. 
She said that in the event of, say, a fire, the insurance company would still cover the expense. It would be called "sudden and accidental" damage.
The key is that the new buyer did not know the quality of the work done. Once walls are covered with drywall, it would be difficult to know if the wiring, plumbing and insulation were done to code or done in a quality way. The assumption is that it was done in a safe and code compliant way. If the buyer knew otherwise, the liability may shift. Regardless, the repairs would be required to be done with permits.
My advice to buyers, and I have done this, is to create a contingency that requires that previous finished work be inspected by a county or city inspector. In my electrical company, I call permits and inspections "cheap insurance." Once an inspector signs off on work my crew has done I can always go back to that "passed" sticker and show that it passed the local, state and national codes. That means that it was done in a safe and professional manner.
Of the professionals I spoke with today, none believed the listing or selling agent would carry any liability for selling a home with un-inspected renovations. But, could these renovations be considered latent defects? That's a question for a real estate attorney.
Knowing whether renovations have been done is one of benefits of working with Cornerstone Business Group, Inc. At Cornerstone, we're agents and we're contractors. We often find construction issues when viewing homes. That added insight gives Cornerstone clients an advantage when buying a home.
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