Finding code violations in walkthrough

[Keith Goodwine]

Hi all!  I walked through a house yesterday, and talked with some very interested sellers.  They would like to move quickly from their larger house to a smaller house, and are willing to negotiate.  I think we're going to be able to strike an agreement to buy in as-is condition.

This is my first potential deal, and I wanted to educate myself a little bit on what to do with code violations.

The house has had many self-done add-ons by multiple owners since its original construction. During the walk-through, I found several undisclosed code violations.   Most of the house does not have a crawl space.  The sewer drain pipe from the washer runs outside the home, and connects around to another point under the house, due to the lack of crawl space.  There is an undisclosed bedroom as well when compared to the tax records - records show three, they currently have four, and there are a couple other rooms which could be used as bedrooms as well.  The roof was apparently three months old, but looked very poorly constructed.  The current owners started to add a garage, but it does not look structurally sound.  I'm sure an official home inspection will turn up more issues, but those were the largest structural things I could find.  (Many other cosmetic issues exist, but I consider those normal.)

What should I tell them when I come back with repair estimates and offers?  A code violation requires disclosure and seller credits to mend when selling with a realtor correct?

Also, compared to their mortgage balance, I'm not sure an offer can be accepted here.  Even a lease option would require the end buyer to do some significant updates and repairs to be able to rent out the home.  Are there any other creative solutions?

Thanks!