You are taking over the existing leases, so that part is hard to correct if there are any deficiencies.

I also want to see the bills paid to address past deficiencies. 

If there is good equity in the property and the deficient amount doesn't put the property over market value and you can come up with the back payments, interest and fees - wouldn't this be a good option?

Therefore if an experienced home inspector is already going to go through the house and list everything that is wrong asking for a estimate of the actual cost it would take to fix the deficiencies would provide more value to you then if you only received an inspection report.

@Mark Parzych I like your point about the upgrades and differences in costs, especially installing them now and now that you are going to sell your rehab.If you want to become a real stickler owner, you can create a punchlist of all the outstanding and deficient items (like the not straight outlets), and then go around and mark everything you see with little pieces of blue tape.

If not, what deficiencies were identified.  

In addition to both of you paying off the existing mortgage, friend needs to negotiate a payoff and release of the deficiency judgment lien.

If you are deficient as a borrower, then they will not finance your deal.

Also, I don't know about your state laws and your networth because the lender may try to go after you for the deficiency, but that's the chance I'm willing to take.

If deficiencies are discovered that did not previously exist or were not previously disclosed, Buyer(s) may seek bids for repair and add the amount to escrow when using FHA financing.