The practical effect on a sale is a narrowed buyer pool. An investor who wants the rental income cannot get it credited by a lender, and an owner occupant who does not want tenants at all has no reason to pay extra for the conversion, which leaves the seller absorbing the cost of the work with almost no one willing to pay for it back.
Bringing the unit up to legal secondary suite status, meeting minimum ceiling height, egress window and separate entrance requirements, before listing is usually the better outcome financially than selling with the issue disclosed, since a lawyer's review during the condition period will surface an unpermitted unit regardless of whether the listing mentions it.
Joel Dyck advises sellers on that legalize-or-disclose decision based on what the specific space would cost to bring into compliance. Get your hand-reviewed valuation from Joel Dyck.