Ok, so now it's time to sell the property. How does the fact that this
rather large shed has been built (not according to code, although not
necessarily not according to code...fact is I doubt he knows what the
"code" is) affect the transaction, or how COULD it affect the
transaction and life after the transaction?

Do what sellers do when they have any addition, such as a pool or anything that a permit has not
been issued for.... simply say "shed is a gift". This way, you tell the buyer that the shed is free
and is up to the new owner to get a permit for it. If the buyer says he does not want to go through
all of that, tear it down. End of story. No shed. No permit needed. And since it is a gift, it has
no value and no money can be deducted from the asking price.

Tony