vsuresh Your quoted sentence is not a good one. " George said that when he saw the advertisement, he knew it was the house he (was)(had been) looking for. [Y] (Indirect speech) In line with the general practice, we change past tense in direct speech to past perfect in indirect speech.
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vsuresh Your quoted sentence is not a good one.
It should be "When I saw the advertisement, I knew it was the house I (was)(had been) looking for."
vsureshin the example given above I feel 'saw' and 'was' can be retained in indirect speech.I agree.