Generally, it's the bank that's being screwed.Normally, the deficiency is negotiated away and if seller is an owner occupant, there are no tax consequences these days.

Our standards are pretty much the same as yours, but they also state:*Minor deficiencies in one of these three areas may be considered on a case by case basis if there are mitigating factors and all other areas are satisfactory.

There can be some situations where it makes sense and is reasonable.....but in my experience its often a huge red flag that they are hiding something or trying to bribe you to overlook some deficiency on their end.

There are standards of practice and specific items that they are required to address and note as deficient or missing. 

slight correction  Purchase money is only for owner occ... and its only in certain states with CA OR WA NV AND AZ being ones i know off the top of my headTexas NO WAy you default there even owner occ and they can and will seek deficiency judgements PG or not.

John is absolutely correct (and I'm not qualified to judge, but just a personal opinion) as the lender is entitled to seek a deficiency judgment after disposing of collateral, be it residential or commercial.

If the BK didn't discharge the loan you can look into a deficiency judgement as an additional method of recovering from this investment.  

An LLC will protect you from "internal" attacks - a tenant suing you for a rental deficiency, a contractor for hiring/payment/accident problem, etc.

the agent encouraged you to not worry about an obviously deficient product. 

Daniel,Property managers are not licensed inspectors, but visually look over the property to note deficiencies.