just to add to this. I am now at the final inspection stage of my basement renovation and theater. We have home business liability insurance and were told by the insurance company that all modifications must be inspected and that they check. I thought it was hogwash only to get a letter indicating that they needed proof that the recent renovations were completed with full compliance. I called to find out A) how they knew I did basement renovations since we never told them, and B) what proof they wanted. Turned out they contact the village office once a year for folks with this particular insurance and it showed two open permits more than 6 months old (which is right, we have taken a long time to finish everything).
A lot of folks pushed me to do this without permits illegally noting it could have no issues. We had to, for the reasons I stated, and since then I've also learned the following:
-A house in the development across from ours caught fire in the garage. This was due to a garage heater installed by the owner. There was no permit. The Insurance company denied the claim and the house was abandoned by the home owners so the bank would forclose. Apparently they really do deny claims based on this.
-My contractor is doing a renovation on some bathrooms in a clients house and found a leak had caused both extensive mold growth and damage causing the ceiling to collapse below the bathrooms. The insurance inspector noted that earlier bathroom renovations done by a previous owner were done without permits and were deemed the cause of the damage. Claim denied. The home owner is suing right now but isn't expected to win (The contractor said he has seen this before and the client didn't win).
-A house in our subdivision was foreclosed on because the owner (who was under water) couldn't sell the house. Three sales fell through and the rumor is that he did extensive renovations without permits that aided in the homes current value. A bank or multiple banks would not issue a mortgage because there was no permit for these rennovations and they wanted it corrected and the price reduced accordingly. It is my understanding that the issue came to light from a bank requested inspection.
-When the head inspector came to my house we were chatting about some stuff and he mentioned that he was glad to see I did this with permits because they were currently investigating a number of homes in the area that they have become aware of as having built out basements with no permits. They have decided to go after these home owners and their contractors (if they had one) and the fines were very high. He mentioned that the board approved fines as high as $10,000 total. I thought he was just trying to scare me but then heard from a neighbor they got a letter and now need to have their basement inspected and are being asked to open up the wall in numerous locations.
I also failed the final electrical inspection because my outlets were not self grounding. Mind you, the back strap is tied to ground and the outlet does self ground when installed, but they don't officially say self grounding and they didn't have this little brass clip, so the inspector failed it. I had to go around and install pigtails on all the outlets and now have to wait 10 days before re-inspection. I hate inspections, but I'm still glad I did it.