Hire a appraiser get a third party opinion. 

How much do you want to work with this guy?  If he is that unreasonable about this...it may be better to refer him out.

Richie Alan Naggar ask the seller to for the professional appraisal and go by his/her report.

And even after the seller is not happy.......

pull county records. "sir, we can only show what is on the county record" unless you go thru the process of reevaluating.. the county will charge you and come out to inspect that new portion. and then maybe they will restate the size, if all permits were done.

The easy answer is to allow it to be included but to disclose, disclose, disclose. However, I would talk to your attorney since you are required to put a specific number of square feet in the MLS. Not worth getting sued.

Depending on how it has been completed, it may have value and appeal to a potential buyer but that "value" will take into account that it is non-permitted.   That value may not be reflective of what price a buyer may pay or an appraiser may assign.     

Tell him he is not an appraiser. I have had appraisal courses but a long time ago but if SF is added on it does not mean that the value is the same as the house.

And your City/County does not recognize it as an improvement, I would presume?
The seller is not paying taxes on that additional square footage?
Does the room 'flow' in such a way that it truly looks/feels like the rest of the home? (We had this happen not long ago with a home that had a BEAUTIFUL AZ room. Appraiser would not include it, even though it WAS permitted, insulated, heated, cooled etc . . . because there was still a step down from the home to the room - and the exterior stucco and patio lights still remained on one wall.)
If you haven't been told by at least one appraiser that the room would be considered additional square footage, and your area relies on bank financing . . . this is a problem.
If the seller is so adamant that this room be included, he should hire an appraiser to confirm that so you can properly represent this property. Otherwise, you'll need to decide if the 'grief factor' is worth your current fee, or if you need to either renegotiate that fee or rethink your business relationship with that seller.
If your area may be hopping enough that a cash buyer would love the home, however . . . perhaps compromise with him and give it a timeframe:  "We will try it your way for X weeks/months, and if we hit a pothole, we do it my way!"

Lots of thoughts, lots of consumers who think they know better. :D

Maybe you can get a copy of what counts in appraisal guidelines. Sometimes if it is black and white it is better than what they consider hearsay for the seller:)

Be up front in your descriptive.  Explain that the given square footage includes a non - permitted room. Let the Buyers negotiate a selling price being fully aware of this. If you think the inclusion of the non permitted rooms value in the list price will keep Buyers away , don't take the listing or refer it.

It has value if it is done professionally but wouldn't be counted as part of the square footage of the home.  Just think of it this way.  There is a beautiful non-permitted pool in the backyard that shows wonderfully.  Don't you think this pool would add value to the right buyer?  Yes, you would need to disclose it but that doesn't mean the buyer gets it for free.

Good morning Richie. I see this issue a lot, it will show up during the appraisal process and then a sale can fall apart. The right time to deal with the issue is during the listing process.

I also agree with Sam Shueh. Get a non-partial third party appraiser to speak with him. Also, get in writing what appraisers can and can't add to the total square footage of a house.

Who is the expert herre, you or the seller? Explain as best you can but ultimately you will be the one looked at as misrepresenting the facts and that could hurt you and your business. If the seller doesn't come around you might ought to pass.

I don't think so Richie, I would like to here the explanation as why?

I think it could be advertised with disclosure.  Seller might not want that disclosed although somewhere down the road it will be coming out.  Better up front?  and he gets his square footage he wants shown.  Mark

As long as it's not recognized in the Proerty Appraisers record I won't recognize its presence either. At some point the issue will be resolved and it won't be coming out of my pocket or a Buyer I represent. 

Richie,

I like Sam Shueh 's answer.  A non-biased third party.  Or, it is time to say Goodbye!  A

he needs to produce a permit for the that space to be occupied as a legal space according to the health codes and building codes.... period....or there will most likely be a closing followed by litigation....tell him to hire an attorney now in preparation for the future...

Well, it is part of the home.  Though, if this home were in Florida, this room needs to be permitted before the sale can be executed.  (Unless it's a cash buyers willing to write off on the unpermitted work and also agree to waive title insurance for the same.)

Tell him to file for the permit and get the addition up to code????

 Does the unpermitted space have value?  Regardless of what an appraiser or the city/county says, as an experienced agent that knows the market you can have an opinion on it.  That being said, I might say something like "yes it has value but we will state that xx sq footage in xx room in not permitted and buyer to do their own due diligence."  You might also tell the seller something like - if it were fully permitted it might have $xx value but because of potential buyer concerns, city/county regulations and because it was done without permits it might only be worth xx to a buyer.

I just finished a kitchen remodel which included vaulting a ceiling, installing a new header, reconfiguring plumbing, electrical, gas, etc.  I pulled permits for all of it because there were structural changes.  A buyer is more willing to spend more knowing that the workmanship is solid and permits are all intact.

This is how I would handle it and how I've seen it handled in the past:

"Sun room is not permitted.  Seller believes square footage to be 1600, assessor has 1400.  Buyer to make own determination of property and lot size."   The lot size is just to cover all the bases.

I think the answer to that depends on your particular MLS's rules on this. For example in ours a home with a permitted septic system for 3 bedrooms that has 4 bedrooms has to be listed as a 3 bedroom home, but we can list the square footage for the 4th bedroom so long as it's heated area.

Apprasil would be best, but if no one wants to pay the money I'd find where in the code it states it is not and show him. If that does not work, I'd take it as a referral.

I see some great answers here Richie though in my area permitting is not such a big deal and a room is a room if the footage is there we count it.

No problem. However, the only buyer will be a cash buyer.

In Florida, that restriction is not such a big deal. Nearly 60% of all sales are cash. In your area, it could dramatically reduce the buyer pool.

Explain how the title process is going to become a problem when the tax record and the signed contract do not match. Explain how the lender and the home insurer are not going to let this pass.

The challenge becomes if the sq feet in question make the difference between a 2 br or 3 br home.  That issue has greater challenges.

I helped sell a house with a non-permitted kitchen. The buyer was advised the option available was to make the kitchen disappear. They purchased the house with the rogue kitchen with the understanding the buyer would remove the kitchen.