So competition is high.

They have said to send over a competitive LOI and they'd consider it (on tax rolls for ~80k, small rural town). 

If that were true the various real estate niches would have almost unlimited competition and profits would head toward 0.  

We tested it was not black mold and there were light spots with the lack of using the ventilation.

Keep this in mind when calculating potential profitability.Research active and potential competitive rentals in your intended market near Gatlinburg, not just through AirDNA, but searching booking platforms.

.- I get an experienced sponsor/developer that can run the show so I don't run the risk of making any (very expensive) mistakes from my lack of experience.- I can get exposure to large multi-family with many tenants.

I am not looking to waive the inspection but what other options can I present that people have used which makes the offer competitive.

If you can raise capital that will easily help you find a group that may lack that specialty but you should also have another function.If you are part of the GP you will get a portion of the acquisition fee. 

Luckily the personal referral had the most competitive bid and ended up going that direction.

I have seen so many "attorney home made" leases, some better than others, but what they all lack is they have not been "court tested".