Are building permits really necessary?

Building permits cost money, and nobody will even know if you are just doing interior work, right? 

Building permits do cost money, sometimes a lot of money depending on the municipality. So what are the pros and cons of applying for building permits?

They give a sense of legitimacy to the work performed. If you did work on a property, and did not apply for permits, it will give the impression that you did not do quality work. This may not be true, but the perception will be that if you had nothing to hide, you would have applied for permits.

When a buyer, or their lender looks at the history of the property, if there was obvious work done without permits there will be a huge red flag. This, in turn, will cause potential issues with closing. Personally, I love investigating a potential purchase and finding out that unpermitted work was performed. It can provide great leverage in negotiating a reduction in price. In many cases it is relatively easy and inexpensive to correct if you are already planning a rehab.

Stop work orders. Wow, talk about a buzz-kill. Just when you thought you had that workflow moving along smoothly the building inspector shows up and slaps a stop work order on you. Maybe even a fine. So now you have to go file for permits, and wait for approval. I remember one time when my boss tried to get away without permits. Almost a month later, after tearing apart much of what was done, plus some!, we got back to work on that job. Why so long? Because the building inspector had an agenda, and was trying to set an example for all of the contractors not applying for permits. So he dragged his feet and delayed in every way he could (with his boss's knowledge and approval). What would a month delay do to your project?

Bottom line? Except for extremely trivial projects such as toilet replacement it is a good idea to get a permit.