What happens if we build a half bath in Minneapolis without getting permits for any of the work? Specifically, if we intend to sell the home at some point in the coming years?
Non-expert information ahead... For the most part, nothing happens... immediately. People do work without permits all the time. Sometimes its very major work, sometimes it's just a "technicality" and the permit is kinda silly. Often, no one finds out and no one asks. I'm not saying it's ok - just saying it happens.
But, since you are planning to sell soon, you really should make sure it's all on the level. Say the buyer has an inspector come by and he finds any little silly issue with the work. A good Realtor would ask for the permits on the recent work. If you don't have them it turns into a huge negotiation tool. It might not even be an inspector. Someone could just notice the recent work or see that the number of bathrooms has changed.
Then let's say that you don't sell the house and you live there. A pipe in the shower springs a leak and you call the insurance company. Strange - we don't have a record of that extra bathroom. Where are the permits for the work? Oh, no permits for this illegal addition? That's not covered, and furthermore, we are dropping the policy and reporting this to your lender.
Of course cases like that are rare, and that's why people skate by and don't get permits and claim, heck I've never pulled a permit and never had an issue! Like so many building rules, that's right - you never have an issue at all, until you have a big, huge expensive issue.
Can you - probably, if you don't require any outside contractors.
Should you - likely not. Most places that expect you to file permits will fine you heavily from the earliest date they can figure you started the work on, to a tune that is FAR more than simply getting the permit in the first place would have cost you.
Local to me, one example is roughly $60-70 for the permit, but both retroactively and until a permit is issued once they do notice - $50/day.
That is a question for the AHJ (Authority Having Jurisdiction) i.e. Your local authority who issues the permits. Their requirements vary.
If you are asking "is evading the permit process worth it?", ask local contractors. They certainly would prefer not to pull permits if they don't have to.
Obviously towns are trying to make it "not worth it". In our town they will condemn the occupancy until you demolish the unpermitted work... and to add insult to injury, you must pull a permit to do the demolition. And then pull another permit for whatever new work is necessary to return the house to a habitable state.
I enclosed the patio of my previous house after we failed to sell it (was after the great real estate crash of 2009, when little real estate was moving). I went through the hassle of getting a permit, as well as a licensed electrician who could pull a electrical permit. It does indeed help avoid issues when trying to sell, as there's an official record as well as inspections.
The building permit for me was a percentage of the cost of materials. I had just placed the order with a local lumberyard so I knew my total. Since we were only building two walls, my costs were low and my permit was a whopping $10. They gave me the permit and I really only kept it in the window for the building inspection itself.
The electrician was pricey (about 30% of the project, given the low costs), but everything was up to code. The city had just updated a spec on pancake boxes for fans (caught the electrician off guard, but it was a simple fix with open walls) and mandated AFCI breakers on the new stuff.
What this does is to help insulate you against future liability. If there was a permit and inspections, everything was above board. It makes it much harder for a lawyer to come back and sue you, as you can pull permit documentation and inspections. Otherwise, you get to argue it was working fine for you up until you moved.
As others have stated, it's not always a good idea, but people get away with not getting them all the time.
As a general rule, if you're touching plumbing or electrical, I recommend checking with your local jurisdiction and getting one if they require it - and they most likely will - just to cover yourself when it comes to potential future insurance claims.