Legal Question in Real Estate Law in California

First, I would try to have a chat with the inspector or other city official who made the determination. Perhaps an addition was built without permits. Try to determine exactly what is wrong with the 3rd "bedroom" and whether it can be repaired, or the problem corrected, through amnesty or corrections short of tearing it down. It also mght be worth while to hire a contractor with substantial experience in residential additions, including permit rules, to advise you. Be aware that City Hall is tough to fight and won't always compromise.

I agree with Mr. Whipple. I would add that nothing in land titles list the number of bedrooms on the property. I would also add that if the problem is a third bedroom was added without permits, and the person who sold to you was the person who added the bedroom, you can sue them and their listing agent, if you can still find them.